Question 25 A university that formally integrates the budget in the accounting system and uses encumbrance accounting orders some new computers that will cost approximately $20,000. To recognize this event the university should make which of the following entries? a. Debit Expenditures $20,000; Credit Encumbrances $20,000 b. Debit Encumbrances $20,000; Credit Reserve for Encumbrances $20,000 c. Debit Encumbrances $20,000; Credit Vouchers Payable $20,000 d. No entry required when the order is placed.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Question 25
A university that formally integrates the budget in the accounting system and uses encumbrance accounting orders some new computers that will cost approximately $20,000. To recognize this event the university should make which of the following entries?
a. Debit Expenditures $20,000; Credit Encumbrances $20,000
b. Debit Encumbrances $20,000; Credit Reserve for Encumbrances $20,000
c. Debit Encumbrances $20,000; Credit Vouchers Payable $20,000
d. No entry required when the order is placed.
Question 26
Capital budgets focus on plans for the acquisition and construction of fixed assets.
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Question 27
In which of the following cases would the reserve for encumbrances account be decreased?
a. Budget revisions are made, decreasing Appropriations
b. Payment is made for goods received
c. Goods, related to purchase orders, are received
d. Purchase orders are issued
Question 28
Expenditures should be budgeted by character. An example of a character classification would be
a. Current expenditures.
b. Salaries.
c. Public Safety.
d. Police Department.
Question 29
An officially adopted budget is generally called
a. An appropriation bill.
b. An operating budget.
c. A capital budget.
d. None of the above.
Question 30
Not-for-profit budgets focus first on revenues and secondarily on expenditures.
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