Question

A county has $3,650,000 of outstanding encumbrances related to unassigned resources at year-end, December 31, 2019. It expects to accept delivery on all orders in 2020. How should the county handle the outstanding encumbrances in its General Fund balance sheet at December 31, 2019?

Answer 1

A. It should close the open encumbrances and show them as part of assigned fund balance

Step-by-step explanation:

Encumbrances includes purchase order, payroll commitments, legal penalty and so on that is chargeable to an account. So, in this case, the county is expecting the purchase order made in 2019 to come in 2020. In filling the balance sheet, for year end 2019, the open outstanding encumbrances should be close and shown in the balance sheet as assigned fund balance. This is because governments are not allowed to reports amount ls encumbered, but rather should be classified as either committed or assigned.