What in an encumbrance entry and why do municipalities employ encumbrance accoun

Question

What in an encumbrance entry and why do municipalities employ encumbrance accounting?

What is the differnce between an expense and an expenditure?

When is receivable recognized for property tax purposes? Wehn i sthe revenue recognzied?

Can a department journalize its budget into its chart of accounts although they have no effect ont he fund itsef? If so, it is possible to change the budget during the fiscal period?

What type of accounting does a minicipality need to use for fund accounting.

How does one employe the accoutning technique used in the previous question?

Explanation / Answer

1)

Encumbrances are journal entries which are recorded pre-expenditure. It helps in keeping track of any specified expense and is also used as a planning tool.

Muncipalities use encumbrance accounting to reduce overspending on pre determined expenses. It also helps predict cash outflow relating to the expenditure. Muncipalities have a major part of their expense as pre determined and hence encumbrance accounting will help keep the same under control.

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