The "reserve for encumbrances-prior year" account represents amounts recorded by a governmental unit for:
A) anticipated expenditures in the next year.
B) expenditures for which purchase orders were made in the prior year but disbursement will be in the current year.
C) excess expenditures in the prior year that will be offset against the current-year budgeted amounts.
D) unanticipated expenditures of the prior year that become evident in the current year.

Question

Quizplus · Accepted Answer

The "reserve for encumbrances-prior year" account is used to earmark funds for expenditures related to purchase orders, contracts, or other commitments made in the prior year but for which the actual disbursement of funds will occur in the current year. This ensures that the budget accurately reflects committed funds and helps in the financial planning and control process.

The "Reserve for Encumbrances-Prior Year" Account Represents Amounts Recorded by a Governmental