A University That Formally Integrates the Budget in the Accounting

question 8

Multiple Choice

A university that formally integrates the budget in the accounting system and uses encumbrance accounting orders some new computers that will cost approximately $20,000.To recognize this event the university should make which of the following entries?

• A)Debit Expenditures $20,000; credit Encumbrances $20,000
• B)Debit Encumbrances $20,000; credit Reserve for encumbrances $20,000
• C)Debit Encumbrances $20,000; credit Accounts payable $20,000
• D)No entry required when the order is placed.

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Definitions:

Invoice Date

The date on which an invoice is issued, marking the point in time when the billing process for goods delivered or services rendered begins.

Sales Returns

Transactions where customers return previously purchased merchandise, leading to a reversal of sales revenue.

Allowances Account

An account used to offset the gross accounts receivable balance for the estimated amount of uncollectible accounts.

Credit Sale

A transaction where the goods or services are provided to the customer with payment to be made at a later date.