Which of the following requires the use of the encumbrance system?
A) Capital projects fund
B) Debt service fund
C) Internal service fund
D) Enterprise fund

Question

Quizplus · Accepted Answer

The encumbrance system is typically used in governmental accounting, particularly for funds that are subject to budgetary control and where spending authority is given based on appropriations. A Capital projects fund, which is used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds and trust funds), often uses the encumbrance system to ensure that appropriations are not exceeded. This system is not typically used for Debt service funds, Internal service funds, or Enterprise funds, as these funds operate more like private sector businesses and do not use encumbrances in the same way.

Which of the Following Requires the Use of the Encumbrance