The Reserve for Encumbrances Account Is Properly Considered to Be

question 16

Multiple Choice

The reserve for encumbrances account is properly considered to be a:

• A) current liability if payable within a year; otherwise, long-term debt.
• B) fixed liability.
• C) floating debt.
• D) reservation of the fund's equity.

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Definitions:

Equity

The value of an owner's interest in a property or business, after subtracting liabilities.

Financial Asset

An asset that derives value from a contractual claim, such as cash, ownership interest in an enterprise, a bond, stock, or right to receive cash from a contract.

Accounts Receivable

Money owed by customers to a company for goods or services that have been delivered or used but not yet paid for.