What Is the Appropriate Accounting for the Signing of a Contract

question 91

Multiple Choice

What is the appropriate accounting for the signing of a contract to build a new water treatment facility by an Enterprise Fund?

• A) Debit Encumbrances.
• B) Credit Budgetary Fund Balance - Reserve for encumbrances.
• C) Both A & B.
• D) No entry is required.

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Definitions:

Gain Recognition

The process of recording increases in asset value, typically when assets are sold for more than their book value.

Consolidated Income Statement

A financial statement that combines the income, expenses, and profits of a parent company and its subsidiaries to present the overall performance.

Subsidiary Sold Land

An event where a company owned by another company sells a piece of real estate.

Consolidated Sales

The total sales revenue of a parent company and its subsidiaries, reported as one figure in the consolidated financial statements.