Format & Content of Comprehensive Annual Financial Report 2 - Encumbrance Accounting/Deferred Outflows & Inflows

Question 1

What do Encumbrances do?

Answer 1

Help control spending, according to budget authorization, formally recorded commitments until orders are received

usually used for purchase orders or when there is going to be a delay in getting the invoice in order to not over spend the appropriated budhet

Question 2

What are some standard Journal Entries for Encumbrances?

Answer 2

Purchase Order issued:
Dr. Encumbrances
Cr. Budgetary Fund Balance

Purchase Order filled:
Dr. Budgetary Fund Balance
Cr. Encumbrances

Record Invoice for goods received:
Dr. Expenditures
Cr. Vouchers Payable

*expenditures use the actual amount on the invoice

Question 3

What journal entries do you make if there is encumbrance obligations outstanding at the end of the year?

Answer 3

Close out the remaining encumbrance balance

but if the remaining encumbrance is going to be honored w/in the next year make the below entry

Fund Balance - Unassigned
Fund Balance - Assigned (or committed)

Question 4

What are Deferred inflows and outflows of resources as they pertain to governmental accounting?

Answer 4

Are inflows and outflows of resources that occur in a period but are related to a FUTURE Period

*“Deferred” classification is only allowed in governmental accounting when referring to inflows and outflows