Area III: State & Local Governments — CPA Practice Question 48

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Two steps when goods arrive: 1. Reverse Encumbrance (at original PO amount). 2. Record Expenditure (at actual Invoice amount).

Full Answer

C.Debit Budgetary Fund Balance Reserved for Encumbrances $40,000; Credit Encumbrances $40,000; AND Debit Expenditures $42,000; Credit Vouchers Payable/Cash $42,000✓ Correct

When the order is filled: First, reverse the encumbrance entry for the original amount ($40,000). Second, record the expenditure for the actual amount ($42,000).

Common mistakes

Reversing encumbrance at actual cost; recording expenditure at encumbered amount.

A government places a purchase order for a new police car costing $40,000. When the car is received, the actual invoice is $42,000. Which of the following entries should be made in the General Fund upon receipt of the car?

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Common mistakes

Practice the full CPA BAR Practice Exam 3

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