The following schedule shows the amounts related to general purpose supplies that a city debited and credited to the indicated accounts during a year (not necessarily the year‐end balances), excluding closing entries. The organization records its budget, encumbers all its expenditures, and initially vouchers all payments. It accounts for supplies on a purchases basis.
1. Some information is missing. By reconstructing the entries that the organization made during the year, you are to determine the missing data. You need not show the entries; simply fill in the blanks. The city began the year with $5,000 of supplies in inventory and ended the year with $7,000. Assume that the reserve for encumbrances will be properly reported in the appropriate classification of fund balance.
____________________________Debits Credits
_____________________________(in thousands)
Cash.....................................$ 0..........$ 70
Vouchers payable........................?..................?
Appropriations...........................0...........115
Encumbrances............................?..................?
Expenditures............................58.............0
Reserve for encumbrances............58............93
Fund balance-unassigned.............?..................0
2. In which classification of fund balance would the reserve for encumbrances most likely be incorporated?
3. Assume instead that the city accounts for supplies on a consumption basis. Which of the preceding amounts (assuming that appropriations remained unchanged) would be different and what additional accounts would have to be added? What would be the new debits and credits in those accounts?
4. The mayor of the city requests your advice about whether it is actually necessary to (1) incorporate the budget into the accounting system and (2) use fund accounting. What would be your response?