An Encumbrance is the name given to funds that have been set aside when a purchase requisition is finalized and encumbered. When a requisition is processed, funds are reserved for that transaction. The purpose and main benefit of encumbrance accounting is avoiding budget overspending. Governmental organizations usually have legal requirements to keep budgets in line, and not-for-profit organizations have similar types of restrictions involving their grants. The idea is that once a purchase order...(read more)![]()
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