Question

Your customer is using budgetary control and encumbrance. You have an open purchase order for $500 USD, which you decide to match to an invoice for $300 USD. What will be the fund status of the purchase order and invoice?

Answer 1

After matching a $300 USD invoice to a $500 USD open purchase order, the remaining encumbrance on the purchase order is $200 USD, representing an open balance yet to be invoiced. The fund status for the purchase order is 'partially fulfilled,' whereas the invoice's status is 'fully matched.'

Step-by-step explanation:

The question relates to budgetary control and encumbrance in an accounting context. When a customer with an open purchase order for $500 USD matches it with an invoice for $300 USD, the fund status is impacted as follows:

• The remaining encumbrance would be $200 USD, as the original encumbrance of $500 USD is now partially relieved by the invoiced amount of $300 USD.
• The invoice for $300 USD is matched, it means this amount is now recognized as an expense and the encumbrance associated with the invoiced amount is eliminated.
• The purchase order still has an open balance of $200 USD, which is the remaining encumbered funds that have not been invoiced yet.

Essentially, the fund status of the purchase order is now partially fulfilled, and the status of the invoice is fully matched against the purchase order.