Bookkeeping

This proactive approach allows resources to be managed more effectively and avoids the cash being spent before it is needed. Once the encumbrance is approved, the funds are no longer available for use in other transactions. In this document, the IT department can list the equipment they want to purchase and the vendor they intend to use. If management approves, the IT department writes the purchase order, which creates the encumbrance. Paying the expense after the money has been encumbered doesn’t affect the amount of the appropriations. When an organization creates a new purchase order or adds a new line item [...]