During the Previous Year, Bane County Closed Its Encumbrances Account

question 24

Multiple Choice

During the previous year, Bane County closed its Encumbrances account.At the end of the previous year there were $5,000 in outstanding purchase commitments.To restore these commitments to the accounts, which of the following entries would be required?

• A)Debit Reserve for encumbrances $5,000; Credit Encumbrances $5,000.
• B)Debit Encumbrances $5,000; Credit Reserve for encumbrances $5,000.
• C)Debit Encumbrances $5,000; Credit Fund balance $5,000
• D)Debit Fund balance $5,000; Credit Reserve for encumbrances $5,000.

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Definitions:

Equity Investments

Financial assets representing ownership interest in a company, including stocks, which provide dividends and potential capital gains.

Cash Equivalents

Short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

Bank Reconciliation

The process of matching the balances in an entity's accounting records for a cash account to the corresponding information on a bank statement.

Non-current Liability

A Non-current Liability is a financial obligation that a company does not expect to settle within the next twelve months from the reporting date.