The Entry to Re-Establish Encumbrances Related to Purchase Orders from the Prior

question 59

Multiple Choice

The entry to re-establish encumbrances related to purchase orders from the prior year would include:

• A) A debit to Budgetary Fund Balance - Reserved for Encumbrances.
• B) A debit to Encumbrances Control.
• C) A credit to Accounts Payable
• D) None of the above.

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Definitions:

Fixed Cost

Costs that remain consistent regardless of the amount of goods produced or sold, including expenses like salaries or rent.

Capital Budgeting

The process by which a business evaluates and selects long-term investments that are expected to yield returns that exceed the costs of financing.

Discount Rate

The interest rate used in discounted cash flow (DCF) analysis to determine the present value of future cash flows, reflecting the time value of money and investment risk.

Option to Abandon

A strategic financial decision allowing a company to cease an investment or project, thereby limiting its losses.