Question

When equipment was purchased with general fund resources, which of the following accounts would have been debited in the General Fund? expenditures, equipment, encumbrances, no entry should be made. In the text it has an example of purchase of a copier that is ordered and dr to encumbrances. The question doesn't say if it was purchased with a purchase order. I looked in Chegg and the answer was a dr to expenditures...which is true when it is delivered and invoiced..........I am not sure what is correct.

Answer 1

Answer: Debit in Expenditure account is the correct answer.

When the item is delivered and invoiced it is debited in expenditure account.

Encumbrance accounting method provides you an option to track any item that will become expenditure for the company in the future.

Please see below how the accounting process works at different stages of buying an item

	Debit	Credit
Purchase Order entered	Expense account	Encumbrance account
Receipt entered in system	Encumbrance account	Expenditure account
Invoice entered in system	Expense account	Accounts payable summary