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Encumbrance affect on expenditures

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What is an encumbrance? How does an encumbrance affect expenses and expenditures? What is the impact of encumbrance accounting on a governmental budget?

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Solution Summary

The 346 word solution clearly explains and demonstrates the use of encumbrances in governmental accounting.

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What is an encumbrance?

"Encumbrances are the recognition of commitments that will subsequently become expenditures when goods and services are received. Encumbrances are posted for documents such as purchase estimates, purchase orders, and contracts."
http://www.dof.ca.gov/html/calstars/calsdocs/manual/volume-1/v1ch10.pdf

In other words, an encumbrance is a definitive plan to spend appropriations.

How does an encumbrance affect expenses and expenditures?

An encumbrance will not affect expenses or expenditures when the initial ...

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