_____ Which statement is correct regarding encumbrances outstanding at year-end?
A) The following year's budget can be prepared in accordance with GAAP if they are not allowed to lapse.
B) They are reported as encumbrances in the current year's operating statement and as expenditures in the following year's operating statement in accordance with GAAP.
C) They are not reported in the current year's operating statement but are reported in the following year's operating statement as expenditures in accordance with GAAP.
D) Whether or not they lapse at year-end determines how and when they are reported in the operating statements presented on a GAAP basis.
E) None of the above.

Question

_____	Which statement is correct regarding encumbrances outstanding at year-end?
A) The following year's budget can be prepared in accordance with GAAP if they are not allowed to lapse.
B) They are reported as encumbrances in the current year's operating statement and as expenditures in the following year's operating statement in accordance with GAAP.
C) They are not reported in the current year's operating statement but are reported in the following year's operating statement as expenditures in accordance with GAAP.
D) Whether or not they lapse at year-end determines how and when they are reported in the operating statements presented on a GAAP basis.
E) None of the above.

Quizplus · Accepted Answer

Encumbrances outstanding at year-end are not reported in the current year's operating statement but are reported in the following year's operating statement as expenditures, in accordance with Generally Accepted Accounting Principles (GAAP). This approach ensures that expenditures are recognized in the period in which the goods or services are received, maintaining the matching principle of accounting.

_____ Which Statement Is Correct Regarding Encumbrances Outstanding at Year-End