In February, X City ordered $550,000 of supplies. On March 17th it received all of the ordered supplies and an invoice of $551,000. Which of the following would be recorded upon receipt of the supplies and invoice?

A. Debit Budgetary Fund Balance - - Reserve for Encumbrances for $551,000.

B. Debit Budgetary Fund Balance - - Reserve for Encumbrances for $550,000.

C. Debit Encumbrances Control for $551,000.

D. Debit Encumbrances Control for $550,000.

Question

Business

Aaden Adkins

24 February, 09:35

In February, X City ordered $550,000 of supplies. On March 17th it received all of the ordered supplies and an invoice of $551,000. Which of the following would be recorded upon receipt of the supplies and invoice?

A. Debit Budgetary Fund Balance - - Reserve for Encumbrances for $551,000.

B. Debit Budgetary Fund Balance - - Reserve for Encumbrances for $550,000.

C. Debit Encumbrances Control for $551,000.

D. Debit Encumbrances Control for $550,000.

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Answers (1)

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Gisselle Pittman · Answer 1

B. Debit Budgetary Fund Balance - - Reserve for Encumbrances for $550,000.

Explanation:

X City made an order for goods worth $550,000 and when the goods were received the invoice states $551,000. The company should indicate in the invoice the correct amount received and work with that.

Reserve for encumbrances is an account that contains funds that have been reserved for a particular purpose. In this case since the order was made in February, the funds of $550,000 would have been put in this account.

On receipt of the goods we debit Budgetary Fund Balance - - Reserve for Encumbrances for $550,000 (the correct value of goods received).