What should be done with the amount recorded in encumbrance

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Reference no: EM133012278

Problem 1: The City of Charlestown booked an estimated encumbrance when a purchase order was issued for an annual computer technical support service contract. When the invoice for the services was received, the amount was different from the amount included in the encumbrance account. What should be done with the amount recorded in the encumbrance control account?

Group of answer choices

Option 1: Make an entry to increase the encumbrance control account for the gap between estimated and actual fees.

Option 2: Make an entry to increase the encumbrance control account for the gap between estimated and actual fees and then reverse both the original estimate and the gap amounts out of the encumbrances account.

Option 3: Make an entry to reverse the estimated amount from the encumbrance control account and book the invoice amount in the expenditure control account and a liability account.

Option 4: None of the above.

Reference no: EM133012278

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