The City of Island Grove uses encumbrance accounting and its fiscal year ends on June 30. On May 6, a purchase order was approved and issued for supplies in the amount of $6,000. Island Grove received these supplies on June 2, and the $6,000 invoice was approved for payment. What General Fund journal entry should Island Grove make on May 6, to record the approved purchase order

Question

Kian Shah

Business

31 October, 16:04

The City of Island Grove uses encumbrance accounting and its fiscal year ends on June 30. On May 6, a purchase order was approved and issued for supplies in the amount of $6,000. Island Grove received these supplies on June 2, and the $6,000 invoice was approved for payment. What General Fund journal entry should Island Grove make on May 6, to record the approved purchase order

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Mcgrath · Answer 1

The transaction has not yet taken place on May 6, so double entry would not be passed yet.

Explanation:

The reason is that the International Accounting standards says the purchases must be recorded when the goods or the services are been received. As in this case, the goods are not yet received so the transaction has no yet taken place. So nothing would be recorded in the books of accounts. Furthermore, purchases would be recorded on June 6. And also that the received of inventory or goods will also be recorded on June 6.