GeneralLedgerGuide > General Ledger > Working with Journal Entries > Creating a Journal Entry > Encumbering Transactions (Fund product only)
Encumbering Transactions (Fund product only)
When you encumber an asset or expense account, a debit is made to that account for the encumbrance amount and a credit is made to the Reserved for Encumbrance liability account. To set up the Reserved for Encumbrance account, see Working with Accounts. The Encumber check box is unchecked in the GL Journal Entry window by default. If you want to use encumbrance entries, check this check box.
The following example illustrates how to encumber an asset, then at a later date, unencumber and expense it.
Tips & Tricks: Encumbrance Entries
On May 25, a desk is special ordered for $900. When the desk is delivered, a check will be written and the cost will be recorded. The manager, however, would like to encumber the $900 now, so that it will be available when the desk arrives. Ten weeks later the desk is completed, ready for shipment, and the payment is due.
To encumber, unencumber, and expense the $900:
1 Debit the Office Equipment asset account for $900 with the Encumber check box selected.
2 Credit the Reserved for Encumbrance liability account for $900 with the Encumber check box selected.
3 After it arrives, debit the Office Equipment asset account for $900. Do not select the Encumber check box.
4 Credit the Cash account for $900. Do not select the Encumber check box.
5 Debit the Reserved for Encumbrance liability account for $900 with the Encumber check box selected.
6 Credit the Office Equipment asset account for $900 with the Encumber check box selected.
Published date: 04/08/2020