Tips & Tricks: Encumbrance Entries |
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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. |