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"?
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.

Question

Quizplus · Accepted Answer

Encumbrance accounting records the obligation to purchase the police car, reducing the unencumbered balance.

A Governmental Entity Has Formally Integrated the Budget into Its