When Is an Obligation Recorded Under an Encumbrance System

question 8

Multiple Choice

When is an obligation recorded under an encumbrance system?

• A)When a purchase requisition is issued
• B)When a purchase order is issued
• C)When goods or services are received
• D)When payment is made

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Definitions:

Accounts Payable

Debts of a company reflecting the money owed to lenders or suppliers for products and services acquired on credit.

Inventory

All products and materials that a company holds, aimed at either resale or being incorporated into manufacturing processes.

FOB Shipping Point

A term of sale indicating that the buyer assumes responsibility for shipping costs and risk of loss once the seller has delivered the goods to the shipping carrier.

Sales Discount

A reduction in the price of a product or service offered to customers, typically to prompt early payment or bulk purchases.