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    Tutorial 1

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    bolaemil20
    The document discusses accounting entries for expenditures from an appropriated fund. It provides examples of journal entries for a purchase order, receipt of goods, and payment. It also defines unencumbered balance and calculates this in examples.

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    © All Rights Reserved
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    Tutorial 1

    Uploaded by

    bolaemil20
    15 views4 pages
    The document discusses accounting entries for expenditures from an appropriated fund. It provides examples of journal entries for a purchase order, receipt of goods, and payment. It also defines unencumbered balance and calculates this in examples.

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    The document discusses accounting entries for expenditures from an appropriated fund. It provides examples of journal entries for a purchase order, receipt of goods, and payment. It also defines unencumbered balance and calculates this in examples.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    15 views4 pages

    Tutorial 1

    Uploaded by

    bolaemil20
    The document discusses accounting entries for expenditures from an appropriated fund. It provides examples of journal entries for a purchase order, receipt of goods, and payment. It also defines unencumbered balance and calculates this in examples.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    Tutorial 1

    In the expendable fund entity there are critical events in the use of the financial resources. The
    sequence of events is as follows:

    - Appropriation (authorization of max amount allowed for expenditure)

    - Encumbrances (purchase order)

    - Expenditure (receipt of goods)

    - Disbursement (payment)

    Example 1:

    - An order was placed for the purchase of goods for $15,000.


    - The goods ordered are received and invoiced for $18,000.
    - The appropriation for budget category 103 is $60,000. Prior expenditure in this category
    was $20,000
    Required:
    1- Record the journal entries for purchase order, purchase receipt, and payment.
    2- Identify the unencumbered balance.

    Solution:
    Appropriation = 60,000
    Encumbrance (purchase order)
    (entry 1)
    Encumbrance 15,000
    Reserve of encumbrance 15,000
    To record purchase order of goods
    Expenditure (purchase receipt)
    (entry 2)
    Expenditure 18,000
    Voucher payable 18,000
    To record the receipt of goods invoiced
    (entry 3)
    Reserve for encumbrance 15,000
    Encumbrance 15,000
    To record the removal of the recorded encumbrance for goods received and recorded in
    expenditure.
    Disbursement (payment) for goods received
    (entry 4)
    Voucher payable 18,000
    Cash 18,000
    To record payment of voucher payable
    Unencumbered balance = appropriations – (encumbrance + expenditures)

    A B C D=B+C E = unencumbered
    appropriation encumbrance expenditure balance (A – D)
    Prior balance 60,000 --- 20,000 20,000 40,000
    Purchase order --- 15,000 --- 15,000 (15,000)
    (entry 1)
    balance 60,000 15,000 20,000 35,000 25,000
    Expenditure --- (entry 3) (entry 2) 3,000 (3000)
    (entry 2 and 3) (15,000) 18,000
    balance 60,000 --- 38,000 38,000 22,000

    Note:

    (entry 1) Assume that an order was placed for the purchase of goods in the amount of $15,000.

    (entry 2 and 3) Assume that the goods ordered in (entry 1) are received and invoiced at $18,000.

    (entry 4) Assume a cash payment was made for expenditures/for goods purchased in (entry 2).

    Unencumbered balance = appropriations – (encumbrance + expenditures)

    Unencumbered balance: the amount of resources that can still be obligated or expended without
    exceeding the legal or authorized limit.
    Example 2:

    - An order was placed for the purchase of goods for $20,000.


    - The goods ordered are received and invoiced for $18,000.
    - The appropriation for budget category 103 is $60,000. Prior expenditure in this category
    was $20,000
    Required:
    1- Record the journal entries for purchase order, purchase receipt, and payment.
    2- Identify the unencumbered balance.

    Solution:
    Appropriation = 60,000
    Encumbrance (purchase order)
    (entry 1)
    Encumbrance 20,000
    Reserve of encumbrance 20,000
    To record purchase order of goods
    Expenditure (purchase receipt)
    (entry 2)
    Expenditure 18,000
    Voucher payable 18,000
    To record the receipt of goods invoiced

    (entry 3)
    Reserve for encumbrance 20,000
    Encumbrance 20,000
    To record the removal of the recorded encumbrance for goods received and recorded in
    expenditure.
    Disbursement (payment) for goods received
    (entry 4)
    Voucher payable 18,000
    Cash 18,000
    To record payment of voucher payable
    Unencumbered balance = appropriations – (encumbrance + expenditures)

    A B C D=B+C E = unencumbered
    appropriation encumbrance expenditure balance (A – D)
    Prior balance 60,000 --- 20,000 20,000 40,000
    Purchase order --- 20,000 --- 20,000 (20,000)
    (entry 1)
    balance 60,000 20,000 20,000 40,000 20,000
    Expenditure --- (entry 3) (entry 2) (2,000) 2000
    (entry 2 and 3) (20,000) 18,000
    balance 60,000 --- 38,000 38,000 22,000

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