CPA_Starter
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Joined: 12 Dec 2008
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Posts: 123
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| Posted: 10 Jul 2009 at 20:04 | IP Logged
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taxwoman wrote:
I think the entry is:
Dr. Encumbrances $18,000
Cr. Budgetary FB - Reserved for Encumbrances $18,000
The "Budgetary Fund Balance - Reserved for Encumbrances" is a
budgetary account. Like all budgetary accounts, it is a nominal account
(not a real account) and is closed at the end of the accounting period.
If there is an amount in the "Budgetary Fund Balance - Reserved for
Encumbrances" account at the end of the accounting period, that means
goods have been ordered that haven't arrived. For example, if at
December 31, all the purchase orders have been delivered except for
$18,000 worth of goods, there will be a debit balance in "Encumbrances"
of $18,000, and a credit balance in "Budgetary Fund Balance - Reserved
for Encumbrances". The following journal entries illustrate the closing
procedure:
1. Close the budgetary accounts
Dr. Budgetary FB - Reserved for Encumbrances $18,000
Cr. Encumbrances $18,000
2. Reserve part of the REAL fund balance for the orders that will be filled
next year. This is similar to an appropriation of retained earnings for a
for-profit company.
Dr. Fund Balance - Unreserved $18,000
Cr. Fund Balance - Reserved for Encumbrances $18,000
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Can u please explain me the how the valuation account works? in
securities transactions we create valuation account can u help me
understand the closing entries?
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