Modified Accrual Accounting

Question 1

What is the definition of encumbrances?

Answer 1

Commit funds for purchase orders

Question 2

How to record following journal entries:

Encumbrances are like POST ITS*

1) Journal entry to set up Encumbrance - ordering
2) Journal entry to reverse estimated encumbrances - invoice
3) Journal entry to record actual spending

Answer 2

Journal entry to set up Encumbrance - ordering

Dr: Encumbrances
Cr: Budgetary Control

Journal entry to reverse estimated encumbrances - invoice

Dr: Budgetary Control
Cr: Encumbrances

Journal entry to record actual spending

Dr: Expenditures
Cr: Vouchers payable (or cash)

Question 3

How to calculate remaining available appropriations?

Answer 3

Budget: Approprations
- Activity: Expenditures (INCLUDES VOUCHERS PAYABLE)
- Encumbrances:
= Remaining available appropriations