Question

A governmental entity has formally integrated the budget into its accounting records and uses encumbrance accounting. During the year the government ordered but had not yet received a new police car. What effect will this event have on the unencumbered balance in the account "Expenditures—capital outlay, police department"?

Answer 1

Answer: a. The balance in the account will not be affected until the police car is received

Explanation:

The options are:

a)The balance in the account will not be affected until the police car is received.

b)The balance in the account will be increased.

c)The balance in the account will be decreased.

d)Purchase orders never affect any budgetary account balances.

Unencumbered balance is typically used in governmental accounting and it refers to part of an appropriation not spent yet. In governmental accounting, this is the part of the funds available that's left and hasn't been used yet.

Based on the information given, the effect that this will event will have on the unencumbered balance in the account will be that the balance in the account will not be affected until the police car is received.