The City of Denton Uses Encumbrance Accounting to Control Expenditures

question 7

Multiple Choice

The City of Denton uses encumbrance accounting to control expenditures. It charges the cost of outstanding purchase commitments to expenditures in the year they are received, not in the year they are ordered. If the city had $11,000 of purchase commitments outstanding at the end of Year 1 and received those goods during Year 2 at a cost of $11,700, what would be the impact on total fund balance for Year 2?

• A) Total fund balance at the end of Year 2 would be $11,700 less than at the end of Year 1.
• B) Total fund balance at the end of Year 2 would be $700 less than at the end of Year 1.
• C) Total fund balance at the end of Year 2 would be $700 greater than at the end of Year 1.
• D) Total fund balance at the end of Year 2 would be same as it was at the end of Year 1.

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Definitions:

Piece-rate Pay

A compensation system where workers are paid based on the quantity of items produced or tasks completed.

Merit Pay

A compensation strategy that rewards employees based on their performance or achievements, often measured through evaluations or achievement of set goals.

Bonus Pay

Additional compensation given to employees as a reward for achieving specific performance targets or for exceptional work.

Job Performance

The level to which an employee successfully fulfills the roles, responsibilities, and tasks of their job.