Question

Encumbrances Outstanding is shown on the balance sheet as a restriction on fund balance.

True
False

Answer 1

False. Encumbrances Outstanding is not a restriction on the fund balance, but a liability on the balance sheet.

Step-by-step explanation:

False.

Encumbrances Outstanding represent commitments of funds which have been made to pay for goods or services that have not yet been received. It is a type of liability on the balance sheet, not a restriction on the fund balance. It is shown as an outflow in the balance sheet as it reduces the available fund balance.

For example, if a school district has encumbrances outstanding for purchasing textbooks, it means they have set aside funds to pay for the textbooks when they are delivered. This commitment reduces the available fund balance until the textbooks are received and payment is made.