For a purchase order approved under encumbrance accounting in the General Fund, which entry records the encumbrance?

• A. Encumbrances 6,000; Appropriations 6,000
• B. Encumbrances 6,000; Encumbrances Outstanding 6,000
• C. Supplies 6,000; Vouchers Payable 6,000
• D. Expenditures 6,000; Encumbrances 6,000

Answer: (B)

When a purchase order is approved under encumbrance accounting, you’re not recognizing an actual expenditure yet—you’re creating a commitment against the budget. The way this is shown is by increasing the encumbrances amount and creating a corresponding outstanding encumbrance that represents the portion of the budget set aside for that order. So you record a debit to Encumbrances and a credit to Encumbrances Outstanding for the ordered amount. This reflects that funds are reserved and the encumbrance is outstanding.

This setup keeps the budgetary control clear: the encumbrance shows the commitment, and the outstanding encumbrances account tracks what remains to be executed. Expenditures and liabilities (like Vouchers Payable) come later, when the goods or services are received and the obligation is liquidated. The other options either move funds directly out of appropriations, record a liability or an expenditure too early, or otherwise don’t reflect the encumbrance mechanism.