Estimates, Encumbrances, Subsidiary Vocab

Question 1

Encumbrance

Answer 1

commitment to spend (based on a purchase order)

Question 2

Expenditure

Answer 2

The actual spending (based on invoice/receipt of goods)

Question 3

Appropriations

Answer 3

Budget authority granted to departments

Question 4

Subsidiary ledgers

Answer 4

Track detail that supports trial balance summary accounts

Question 5

Reversing entries

Answer 5

Encumbrances must be reversed before recording the actual expenditure.

Question 6

Debit (Dr)

Answer 6

Usually increases assets or expenses

Question 7

Credit (Cr)

Answer 7

Usually increases liabilities, revenue, or decreases assets

Question 8

Reversal Entry

Answer 8

A journal entry made to cancel out a previous one. For encumbrances, you reverse them when recording the actual expenditure

Question 9

Assets

Answer 9

Resources the entity owns or is owed that have value and can help provide future services

Question 10

Liabilities

Answer 10

Obligations the entity owes to others — debts that must be paid in the future

Question 11

Equity (Fund Balance)

Answer 11

The net position — what’s left over after subtracting liabilities from assets. In government, it’s called the Fund Balance

Assets - Liabilities = Fund Balance