Question

3. Hamilton Township needs to make its closing entries to close out its budgetary and operating accounts. Assume that Hamilton Township has a balance remaining of $275,000 in encumbrances outstanding as of the end of the year. The outstanding invoices are expected to be honored in the next fiscal year.
Required: Prepare the journal entries to close the encumbrance account.

Answer 1

1) Journal entries to close encumbrance account:-

Amount Debit ($) Amount Credit ($)

Fund Balance Reserved For Encumbrances 275,000

To Encumbrances 275,000

2) Journal entries when outstanding invocies are expected to be honored in next fiscal year at same amount:-

Amount Debit ($) Amount Credit ($)

Expenditures 275,000

To Vouchers payable 275,000