Question

1. Recording the budget in the General Fund?
2. Recording purchase orders or contracts in the General Fund?

Answer 1

Solution:-

1. Recording the budget in the General Fund:-

As “America’s Checkbook,” the General Fund of the Government consists of assets and liabilities used to finance the daily and long-term operations of the U.S. Government as a whole. It also includes accounts used in management of the budget of the U.S. Government.

2. Recording purchase orders or contracts in the General Fund:-

When a purchase order or contract has been issued, it is important to record the fact that the appropriation has been encumbered in the amount of the purchase order or contract. The word encumbered is used,rather than the word expended, because the amount is only an estimate of the liability that will be incurred when the purchase order is filled or the contract executed. (It is reasonably common for quantities of goods received to differ from quantities ordered, and it is not uncommon for invoice prices to differ from unit prices shown on purchase orders.) The use of appropriation authority is also some what tentative inasmuch as sonic suppliers are unable to fill orders or to perform as stipulated in a contract; in such cases, related purchase orders or contracts must be canceled.

Notice the issuance of purchase orders and/or contracts has two effects: (1) the encumbrance of the appropriation(s) that gave the governmental unit the authority to order goods or services and (2) the starting of a chain of events that will result in the government incurring a liability when the purchase orders are filled and the contracts executed. Both effects should be recorded in order to help administrators to avoid over-expending appropriations and to plan to be able to pay liabilities on a timelybasis.