Question

In: Accounting

Explain the purpose and nature (or characteristics) of the following accounts: a) Appropriations b) Encumbrances c)...

Explain the purpose and nature (or characteristics) of the following accounts:

a) Appropriations
b) Encumbrances
c) Estimated Expenditures
d) Expenditures
e) Estimated Revenues
f) Revenue
g) Budgetary Fund Balance
h) Vouchers Payable

Solutions

Expert Solution

(a) Appropriations : Appropraitions means appropriate to suitable heads. it is use for common expenditures , in case if one wish to calculate costing of particular product or unit one have to appropriate common expenditures.

(b) Encumbrances : It means charge over property , this term is used for creation of charge on property , in case if some one want to take loan , lender may demand collaterial , in that case loneee have to create encumbrance over property.

(c) Estimated Expenditure : By name is is clear that it is not actual expenses , in order to make project or plan or budget one have to estimate expense, it is fore cast , actual may differ from estimated.

(d) Expenditures : It reporesents actual incurred , say one has taken property on rent in US$ 10000 per month , than per month rent expenses is US$ 10000.

(e) Estimated Revenue : IT is also clar from name it self , one have to plan in adavnce that how many revenue is expected from particular project /work so that he can plan accordingly , for ex if unit is engaged in manufacturing of chair , heda have to estimate that in month particular no. at particular with and amount will be sold , estimation is necessary so that he can purchase raw material etc according to that.

(f) Revenue : It represents actual working , incoming in units in the form of sales or other income if any , revenue comprises of sales + other income like rent , interest etc.

(g) Budgetary fund balance : again it is estimate only , one have to plan in advance regarding estimated revenue and expenditures , excess of revenue over expenses is budgetary fund balance.

(h) Voucher payable : it means outstanding expenses, in case if expenses pertains to particular period but not paid it means it is payable , for ex rent is US$ 10000 per month but in case if not paid , one have to enter in the books that Rent Expenditure ac dr and Rent Payable (Voucher Payable) a/c credit.


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