When goods are received for an encumbrance, which entry closes the encumbrance and records the expenditure?

• A. Debit Expenditures; Credit Encumbrances
• B. Debit Encumbrances; Credit Expenditures
• C. Debit Encumbrances Outstanding; Credit Encumbrances
• D. Debit Vouchers Payable; Credit Encumbrances

Answer: (A)

In governmental encumbrance accounting, a commitment to spend is recorded as an encumbrance. When the goods are actually received, that commitment is closed and the expenditure is recognized. The proper entry reflects turning the encumbrance into an actual cost: you debit Expenditures for the amount of the goods and credit Encumbrances for the same amount. This records the expense in the period and removes the encumbrance from outstanding obligations.

For example, if there was an encumbrance for 5,000, the entry when the goods arrive would be Debit Expenditures 5,000; Credit Encumbrances 5,000. This shows the spend is incurred and the encumbrance is cleared.

Why other approaches don’t fit: debiting encumbrances or debiting encumbrances outstanding would not recognize the actual expense, and using vouchers payable shifts the transaction to a liability entry that isn’t appropriate for converting a prior encumbrance into an expenditure.