To Close Reserve for Encumbrances at the End of the Year

question 15

Multiple Choice

To close Reserve for encumbrances at the end of the year which of the following entries should be made?

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

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Definitions:

Double Taxation

The imposition of two or more taxes on the same income, asset, or financial transaction.

Limited Liability Company

A commercial foundation that unifies a corporation's limited liability with the direct tax benefits characteristic of partnerships or sole proprietorships.

Tax Election

A choice allowed under tax law that enables taxpayers to determine how they want certain tax rules to apply to them.

Member-Managed

Pertains to an organizational structure, typically in LLCs, where all members participate directly in decision-making and management activities.