To Close Encumbrances at the End of the Year Which

question 19

Multiple Choice

To close Encumbrances at the end of the year which of the following entries should be made?

• A)Debit Encumbrances; credit Fund balance.
• B)Debit Reserve for encumbrances; credit Encumbrances.
• C)Debit Fund balance; credit Encumbrances.
• D)No closing entry needed.

---

Definitions:

Legal Entities

Organizations that have legal rights and obligations, including the ability to enter into contracts and own property.

Corporate Liability

The legal responsibility of a corporation for the actions of its directors, officers, employees, and agents, including debts and legal violations.

Shareholders

Individuals or entities that own one or more shares of stock in a corporation, giving them certain rights and interests in the company.

Double Taxation

A situation where the same income is taxed twice, often referring to corporate profits taxed at both the company and shareholder levels when dividends are distributed.