Which of the Statements Regarding the Accounting for Encumbrances Is

question 29

Multiple Choice

Which of the statements regarding the accounting for encumbrances is false?

• A) The budgetary entry to record an encumbrance would be a debit to Encumbrances Outstanding and a credit to Encumbrances.
• B) The budgetary entry to record an encumbrance would be a debit to Encumbrances and a credit to Encumbrances Outstanding.
• C) If the actual cost of a purchase exceeds the amount of the original encumbrance, the original encumbrance is still reversed at the original amount.
• D) The recording of an encumbrance is considered to be a budgetary entry.

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Definitions:

Capital Budgeting

The process of evaluating and selecting long-term investments that are in alignment with the company's goal of wealth maximization.

Financial Institution

An establishment that conducts financial transactions such as investments, loans, and deposits.

Capital Budget Committee

A capital budget committee is a group of individuals within an organization responsible for reviewing, approving, and overseeing large capital expenditures or investments.

Accounting Rate

The accounting rate refers to the percentage of return on an investment or project, as determined by accounting methods, which does not necessarily take into account the time value of money.