When a Purchase Order Is Issued Under a Capital Projects

question 125

Multiple Choice

When a purchase order is issued under a Capital Projects fund, how should the transaction be recorded?

• A) Debit Encumbrances Control and credit Vouchers payable
• B) Debit Encumbrances Control and credit Reserve for encumbrances
• C) Debit Expenditures and credit Vouchers payable
• D) Debit Expenditures and credit Reserve for encumbrances

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Definitions:

Prepaid Rent

An asset account that records rent payments made in advance for the use of property or space that hasn’t yet been incurred.

Adjusting Entry

An entry made in the journals to align the accounts with the true financial status by accounting for accrued or deferred items.

Net Income

A measure of profitability that calculates the total revenue minus total expenses, taxes, and costs.

Book Value

The net value of a company's assets, excluding intangible assets, as recorded on the balance sheet, often compared to the company's market value.