Question

On July 1, 2018, Fred City ordered $1,500 of office supplies.They were to be paid for...

On July 1, 2018, Fred City ordered $1,500 of office supplies.They were to be paid for out of the general fund. Entry under:

Governmental fund financial statements              Government-wide financial statements

A) Dr. Encumbrances – Office supplies No entry

Cr. Encumbrances outstanding

B) No entry No entry

C) Dr. Encumbrances outstanding                       Dr. Encumbrances – Office supplies  

Cr. Encumbrances – Office supplies                            Cr. Encumbrances outstanding

D) No entry Dr. Encumbrances outstanding

Cr. Encumbrances – Office supplies

a. Option 1

b. Option B.

c. Option C.

d. Option D.
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Answer #1

Answer:- The Correct Option is A

Explanation:- Journal Entries under Goverment Fund Financial Statements:

Particulars Debit($) Credit($)
Encumbrances-Office Supplies $1,500

Encumbrances Outstanding

(Being Office Supplies ordered and they were to be paid out of general fund)

 $1,500

Journal Entries under Goverment -wide Financial Statements:-

For the Goverment -wide Financial Statements no entry is required,because under accrual accounting, no entry is made until a transaction occurs.

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