1. A county includes outstanding encumbrances as expenditures (legal basis) when

Question

1. A county includes outstanding encumbrances as expenditures (legal basis) when comparing expenditures to budgeted appropriations. To arrive at GAAP basis expenditures, the legal basis expenditures must be adjusted by:

A. Adding encumbrances outstanding at the beginning of the year and subtracting encumbrances outstanding at the end of the year.

B. Subtracting encumbrances outstanding at the beginning of the year and adding encumbrances outstanding at the end of the year.

C. Subtracting encumbrances outstanding at the beginning of the year and at the end of the year.

D. Adding encumbrances outstanding at the beginning of the year and at the end of the year.

Explanation / Answer

To arrive at GAAP basis expenditures, the legal basis expenditures must be adjusted by:

A. Adding encumbrances outstanding at the beginning of the year and subtracting encumbrances outstanding at the end of the year.

The derivation can be worked with this formula:

    Legal basis expenditure + Encumbrances outstanding at the beginning of the year - Encumbrances outstanding at the end of the year.

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