Question

The City of Grand Marais' fiscal year ends on June 30. Grand Marais uses encumbrance accounting. On May 6, a purchase order was approved and issued for supplies in the amount of $6,000. Grand Marais received these supplies on June 2, and the $6,000 invoice was approved for payment. What General Fund journal entry should Grand Marais make on May 6, to record the approved purchase order

Answer 1

Answer:

Debit Encumbrances with $6,000 ; and Credit Budgetary Control also with $6,000 .

Explanation:

Encumbrance accounting is an accounting technique that is mainly employed to ensure that overspending of the taxpayers' money is avoided.

The journal entries will appear as follows in the book of the City of Grand Marais on May 6 as follows:

Details                                        Dr ($)             Cr ($)          

Encumbrances                         6,000

Budgetary Control                                           6,000

To record the approval of a purchase order for supplies