Choice "C" is correct. After the supplies and invoice are received, Elm should debit the internal account for budgetary control for the same $5,000 estimated amount that the account was credited when the purchase order was issued. The journal entries would be:
When the purchase order was issued: | Debit (Dr) | Credit (Cr) |
|---|
| Encumbrances (estimated) | $ 5,000 | |
| Budgetary control | | $ 5,000 |
When the supplies and invoice are received: | Debit (Dr) | Credit (Cr) |
|---|
| Budgetary control | $ 5,000 | |
| Encumbrances | | $ 5,000 |
| Expenditures (actual) | 4,950 | |
| Vouchers payable | | 4,950 |
Choices "a" and "d" are incorrect. Budgetary control is debited for the same estimated amount that it was originally credited for when the purchase order was issued. Do not take the difference between the estimated amount and the actual amount.Choice "b" is incorrect. The $4,950 is the actual invoice amount. Budgetary control is debited for the estimated amount.
