"Cowardice asks the question...is it safe? Expediency asks the question...is it politic? Vanity asks the question...is it popular? But conscience asks the question...is it right? And there comes a time when one must take a position that is neither safe, nor politic, nor popular but one must take it because it is right." ~Dr. Martin Luther King

Friday, 9 December 2011

Encumber...in Accounting Terms?

Anonymous has left a new comment on your post "A little More Light On The Subject":

Does the Town of Aurora encumber their expenses? Is encumbrance accounting used at all in the Town


I don't know the answer to that.

I don't even know what it means.

A little more explanation is needed please.


Paul Sesto said...

Not that you can trust everything that is on the internet ;-) but just by searching "encumbrance accounting" I found the following:

In accounting, an encumbrance is a transaction that occurs when someone needs to put money away (to hold it) for a specific purpose. In municipal accounting, an encumbrance is created when a Purchase Order is issued to buy goods or services. The money has not yet been spent, but is "earmarked" for that purchase and no one else can use it.

In real life, if you put money into an envelope to hold it to pay a bill, you have encumbered that money. You probably don’t use budget codes, but if you have an envelope in your dresser drawer marked “ELECTRIC BILL”, the money you stash away for the next bill is your encumbrance. How much should be encumbered? How much do you THINK your bill is going to be? That’s the encumbrance.

Above referenced from: http://www.answerbag.com/q_view/911170

I hope this helps.

Anonymous said...


How can you not know the answer? You profess to be on top of how tax dollars are spent but you do not know how the Town accounting works?

I did work for the City of Toronto 20 years ago and every employee of the accounting group knew what was encumbered and what was not. And they knew why.

Very disappointing.....

Here's a quick answer:

Encumbrance is a management tool used to reflect commitments in the accounting system and attempt to prevent overspending. Encumbrances allow organizations to recognize future commitments of resources prior to an actual expenditure.

Anonymous said...

Two wonderful answers to Evelyn's question clearly
reflecting the diversity of individuals reading her Blog.
You can pick whichever makes the most sense to you.
I'm partial to the Sesto reply. He doesn't treat people
like idiots and make them ashamed to ask questions.

Anonymous said...

We should keep Paul Sesto in mind come next election. He was very helpful writing to the Citizen
to explain legal issues and I can think of several
seats at the Council table that need new occupants.