Question

List the different budgetary accounts. Select one and explain how it was used. Give an example.?

Answer 1

Answer:

Budgetary accounts- Budgetary accounts are the accounts that are necessary to reflect budgetary operations and conditions. This accounting refers to the comparison of amounts that is planned to spend and that is actually spent.

Examples:

• Estimated revenues
• Encumbrances
• Appropriations

Encumbrances- It is the amount or funds that is reserved for payment of a specific debt or liability. It is the restricted funds that cannot be used for general purpose but only for specific purpose. This concept is mostly used in Government accounting. It is a part of Government budget.

In companies, Encumbrance accounts can be used for following purpose-

• Creating purchase order to buy something.
• Reserving money for payment of taxes, electricity bills, salaries, loan, interest etc.
• Reserving money for contingent liabilities and expenses such as pending lawsuit.