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the primary reason for reestablishing the encumbrance account balance at the beginni 641552

The primary reason for reestablishing the Encumbrance account balance at the beginning of the second and subsequent years of a multiple year capital project is that:

a. The project continues beyond a single year; thus it is important that the Encumbrances account show the amount of contractual commitment remaining on the project.

b. This procedure allows the accountant to record a normal reversal of encumbrances when the next project billing is received.

c. This procedure corrects for an erroneous closure of the Encumbrances account at the end of the preceding year.

d. Failure to reestablish the Encumbrances account balance is a violation of GASB standards.

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