When Supplies Ordered for Use in an Activity Accounted for in the General

question 68

Multiple Choice

When supplies ordered for use in an activity accounted for in the General Fund are received at an actual price that is more than the estimated price on the purchase order, the Encumbrance account is:

• A) Debited for the estimated price on the purchase order.
• B) Credited for the estimated price on the purchase order.
• C) Debited for the actual price for the supplies received.
• D) Credited for the actual price for the supplies received.

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Definitions:

Obsolescence

The process of becoming outdated or no longer used, often as a result of new inventions, technologies, or changes in consumer preference.

Cash Payback Period

The length of time it takes for an investment to generate enough cash flow to recover the initial investment cost.

Net Cash Flow

The difference between a company's cash inflows and outflows within a specified period, representing the overall change in its cash position.

Average Rate of Return

A financial ratio that compares the average annual profit of an investment to its initial cost, often used to assess the profitability of an investment over time.