Encumbrance accounting refers to earmarking funds for a specific future purchase so that the funds cannot be used for anything else. An encumbrance occurs when an estimate is made for an upcoming expense, such as marking an envelope with money set aside for an electric bill. In government accounting, an encumbrance is recorded when a purchase order is issued to buy goods or services. The goal of encumbrance accounting is to enhance budgetary control by reserving funds for expected future expenses.

1. What is an encumbrance accounting?
The funds has not yet been spent, nevertheless will be "earmarked" for in which buy along with no
one else are in a new position in order to use it.
In real life, if you put cash in to an envelope to hold it in order to pay a new bill, you've encumbered
which money. http://www.osc.state.ny.us/localgov/pubs/arm/arm6.htm
In accounting, an encumbrance can be a transaction that occurs when someone needs to put cash
away (to maintain it) to find a particular purpose. you most likely don't use spending budget codes,
but if you've an envelope within your dresser drawer marked "ELECTRIC BILL", the cash an
individual stash away for that subsequent bill is your encumbrance. Within municipal accounting, an
encumbrance is made when a purchase Order will be issued to buy merchandise as well as services.
How a lot needs for you to be encumbered? How Gloucestershire accountant significantly would you
THINK your current bill is actually likely to be? That's the encumbrance.
www.wnyric.org/10551049123333197/lib/10551049123333197/_files/An_Encumbrance_Accounting_
Primer.doc
The formal use of encumbrance accounting like a continuous and integral section of your accounting
product is encouraged as a means of enhancing budgetary control.