The Encumbrances Method of Budgetary Reporting

question 25

Multiple Choice

The encumbrances method of budgetary reporting

• A) Is never allowed by GAAP.
• B) Never results in an outstanding encumbrance.
• C) Is where outstanding encumbrances are considered to be expenditures.
• D) Is always required by GAAP.

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Definitions:

Annual Sale

A sale event that occurs once a year, often featuring significant discounts on goods and services.

Discount

The reduction applied to the usual cost of goods, services, or securities.

Operating Expenses

Costs associated with running the day-to-day operations of a business, excluding the cost of goods sold, typically including things like salaries, rent, and utilities.

Profit

The financial gain obtained when the amount earned from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.