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Subject Topic: in my struggle to understand governmental (Topic Closed Topic Closed) Post ReplyPost New Topic
  
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Holly
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Posted: 03 Mar 2009 at 07:35 | IP Logged  

accounting, i am rereading the two chapters in the book from my advanced accounting class very slowly (I really understood almost nothing when I had this in class).  

Here's what I don't understand so far - it's just the beginning...

If a government orders equipment, for fund-based the JE is:

Encumbrances Control debit of 18,000
Fund Balance - Reserve for Encumbrances credit of 18,000

I just don't understand this.  What does a "Fund Balance - Reserve for Encumbrances" do to the Fund Balance itself - anything? - the Fund Balance seems like it is still there just as it was before, and now there's something new added on to it. 
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taxwoman
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Posted: 03 Mar 2009 at 09:15 | IP Logged  

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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Holly
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Posted: 03 Mar 2009 at 09:43 | IP Logged  

Thanks.  That is interesting how that is done.  
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Danny11506
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Posted: 03 Mar 2009 at 22:10 | IP Logged  

I was wondering if anyone has any advice for someone taking the exam in April.  I plan  on studying from this Saturday until the last week in April.  I am using the Becker review course so I just wanted to know if anyone has any advice.   Should I review my past accounting books or will reviewing the Becker review be sufficient.

Thank you in advance for any advice.

I passed Audit in November with the review course but I just took BEC on Saturday and I feel discouraged by the Becker review course. 



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CPA_Starter
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Posted: 10 Jul 2009 at 20:03 | IP Logged  

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




thats a gr8 explanation.. it helped me ....thanks a lot...

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