[jeff]

Welcome to the Q1 2017 CPA Exam Study Group for FAR. 🙂

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[mckan514w]

Can anyone help out in explaining this one to me? I thought at year end you would close out the encumbrances to fund balance either assigned or committed as appropriate???

A city has a number of open purchases remaining at year-end. These purchase orders are represented in the general fund records as both Encumbrances (debit balance) and Fund balance—reserved for encumbrances (credit balance). Encumbrances outstanding at year-end represent:

A.budgetary control for the general fund.

B.expenditures of the general fund.

C.liabilities of the general fund.

Incorrect D.intentions of the general fund.

Correct answer A. Encumbrance accounting is a method of budgetary control for governmental funds, including the general fund. Encumbrances do not represent expenditures as they are a memorandum of commitments that will eventually lead to expenditures. They do not represent liabilities as the goods and services are yet to be delivered. Governmental intent to commit resources for specific uses in the future is indicated by an assignment of fund balance.

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[aatoural]

@mckan like the question yesterday. Encumbrances in assigned fund balance is future commitment. Is not an expense or a liability, its just money set aside for future expenses on projects.

BEC - PASSED
AUD - 8/29/16
FAR - TBS
REG - TBS

[mckan514w]

grrrrrrr @aa 🙂

So essentially at end of year you reverse the entry of any outstanding encumbrances and then the next year you do it all over again? So for example december 1 you put in an order for office supplies that cost 100. But they do not arrive until middle of January which is a new fiscal year.

So in December you
DR Encumbrances 100
CR Fund Balance reserved for Encumbrance 100

Then end of year since you haven't gotten them you reverse the entry… DR FBRE/CR Encumbrance then in January you re-do the entry???

I am sorry I feel really “thick” when it comes to this… 🙂 Thanks for your help

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[aatoural]

In prior year it does fall under your assigned fund balance as a reserve (cr). Then next year when the moment comes and you need to use the encumbrances then is when you got the expense and the reserve decreases (dr).

No problem 🙂

BEC - PASSED
AUD - 8/29/16
FAR - TBS
REG - TBS

[GiniC]

@aatoural – I'm doing Government next week, but to get ahead of the game – are encumbrances kind of like a balance sheet account, something you don't “close out” at the end of the year but carry over until you use it?

[GiniC]

One of my Becker questions (CPA-00788, #5 of 69 under the Accounting for Income tax MCQs) throws “cumulative taxable differences” into the fact pattern. It wasn't used, but I wasted a ton of time trying to figure out what it meant. Does anyone know how to use a “fact” like that? No information on whether the differences are future benefits or future expenses, just that they exist. Am I wasting time on a distractor?

[mckan514w]

OMFG its like audit with all that circular reasoning… so if it is closed out to assigned fund balance then why isn't it considered an “intention of the govt” at year end…. or is it simply because the question does not state closed out to so you are just to assume that outstanding at year end means- prior to closing the effing books.

Sorry just needed to rant- really I appreciate you trying to help me out 🙂 I am trying to just memorize as much as possible and pray again for lucky guesses on exam day- because honestly after going over these chapters at least 3 times per exam so now 9 times of reading, MCQ and lecture watching- it still does not click-

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[HoosierCPA]

haha I accidentally pulled up the wrong study group and saw some familiar faces! Good luck to you guys hope all is well. Kick FAR's a**!!!

FAR - 78
REG - 72,74,71...please just go away REG nobody likes you!
BEC - 82
AUD - Aug 16

[mckan514w]

Hey its DT!!!! 🙂 when do you re-sit for REG? GOOD LUCK!!!!

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[HoosierCPA]

Feb 14th…I know, my wife is going to love my post exam pissed off mood on valentines day :). I look at it as her final test — if she can put up with me after this then there's no doubt we can make it through anything!

FAR - 78
REG - 72,74,71...please just go away REG nobody likes you!
BEC - 82
AUD - Aug 16

[mckan514w]

LOL good luck! At least you will be able to drink heavily 🙂 My poor husband gets to deal with me in the full on study mode- meaning I might maybe peek up from the screen to say happy v-day now go the eff away 🙂

Fingers crossed for you!!!!

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[mtaylo24]

Don't Know why I feel like posting this, (probably all of this encumbrance talk):

The state contracted to purchase road maintenance equipment
Special revenue fund
Dr. Encumbrance 750
Cr. Encumbrance outstanding 750

Delivery of equipment
Special revenue fund
Dr. Encumbrance outstanding 750
Cr. Encumbrances 750

Equipment cost less than anticipated
Special revenue fund
Dr. expenditures – road equipment 745
Cr. Vouchers payable 745

Year-end closing
State had 12,750 in outstanding encumbrances at y/e
Special revenue fund
Dr. Encumbrances outstanding 12,750
Cr. Encumbrances 12,750

Edit: my lightbulb just went off… its like an accrual for a purchase order in the govt world. (Damn…I'm slow)

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[HoosierCPA]

@mckan there's no doubt a few too many drinks will be had. Maybe while I'm at it I'll get your husband a v-day card to let him know he's not forgotten–nobody truly understands how much of a monster this cpa exam can turn us into besides us. The good news is we can see the light at the end of the tunnel!!! Good luck with FAR–when are you sitting?

FAR - 78
REG - 72,74,71...please just go away REG nobody likes you!
BEC - 82
AUD - Aug 16

[mckan514w]

ha DT I am sure he would appreciate the card considering I completely forgot his birthday this week (yes this exam has turned me into the sh–iest spouse ever). Sit the 24th… and not feeling good at all

@mtaylo– (or anyone else)– would the special revenue fund use encumbrances like that?? I thought that in a fund such as that it would just be a simple DR Expenditure CR Voucher Payable, then DR Voucher Payable CR Cash? I thought encumbrances only were applicable to general fund and tied into the budget — which as I said could be completely 1,000x wrong as GOVT. just will not make sense for me.

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[mtaylo24]

@Mckan514w, Gleim says encumbrance accounting is used only for internal purposes in governmental funds, especially general and special revenue funds. Double check 18.4 in the book.

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

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