Under an Encumbrance System, Which Account Is Debited When a Purchase

question 1

Multiple Choice

Under an encumbrance system, which account is debited when a purchase order is issued?

• A) Expenditures.
• B) Appropriations.
• C) Encumbrances.
• D) Encumbrances Outstanding.

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Definitions:

Stated Value Stock

Stated value stock is an issue of shares that does not have a par value but instead has a nominal stated value assigned by the company.

Preferred Stock

A type of equity security that offers dividends and other advantages before common stock, in the event of liquidation.

Common Shareholders

Individuals or entities that own shares of common stock in a corporation, granting them voting rights and a claim on profits.

Organization Expenses

Costs incurred in the creation of a corporation or partnership, such as legal fees and state filing fees, often amortized over time.