When Is It Not Appropriate to Use an Encumbrance System

question 21

Multiple Choice

When is it not appropriate to use an encumbrance system?

• A)When there is a significant lag between purchase orders and the receipt of goods
• B)When reporting is done on an expenditure basis
• C)When only a small part of expenditures for goods and services are discretionary
• D)When commitments and expenditures are made on a decentralized basis

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Definitions:

Arbitration

A method of dispute resolution where an impartial third party makes a binding decision.

Neutral Third Party

An impartial entity not involved in a conflict or negotiation, often used to facilitate or mediate discussions.

Binding Decision

A ruling or outcome from a legal or quasi-legal process that must be adhered to by the parties involved, leaving no discretion to disregard it.

Classic Two-Party Negotiation

A negotiation framing between exactly two parties where each negotiates to settle on terms or reach an agreement, typically used in business and legal scenarios.