Budgetary Accounting and Encumbrances

Free CPA BAR (Business Analysis & Reporting) lesson in State and Local Governments. 18 min read, ~2,726 words.

Appropriated (fixed) budgets are legally adopted spending ceilings; flexible budgets adjust with activity levels and are used internally, not recorded in the accounts. Budgetary journal entries use contra accounts: Estimated Revenues (debit), Appropriations (credit), and Budgetary Fund Balance to plug the difference. Encumbrances reserve fund balance when a purchase order...

What this lesson covers

• Content
• Example 1
• Example 2
• Common Mistakes
• Key Takeaways
• Exam Shortcuts

Learning objectives

• III.C8

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