Final answer:
When supplies are ordered for a proprietary fund, the appropriate accounting action is to record no journal entry until the supplies are delivered. The correct answer you should select is 'b. None of the above'. Journal entries for supply orders are recorded once the supplies are received and an actual obligation (accounts payable) is incurred.
Step-by-step explanation:
The subject question pertains to the journal entry required for the ordering of supplies in a proprietary fund, which is a type of government accounting. In proprietary funds, when supplies are ordered but not yet received, the proper journal entry is not to record the transaction immediately, since it does not represent an actual inflow or outflow of resources until the supplies are delivered. Therefore, the correct answer is b. None of the above. Encumbrances and reserve for encumbrances are generally used in governmental accounting to indicate that funds have been committed, but this is typically associated with budgetary accounts rather than with actual expenditures in proprietary funds.
In proprietary fund accounting, the transaction is recorded when an economic event occurs. This means that when the supplies are received, the proper entry would be a debit to the supplies (inventory) account, and a credit to accounts payable, reflecting the incurred obligation to pay for the supplies received. Therefore, the entry Debit accounts payable, credit supplies is not correct because it misstates the nature of the transaction: accounts payable should be debited when the liability is settled, and supplies should be credited when they are used or consumed, not when they are ordered.