If supplies that were ordered by a department financed by the General Fund are received at an actual price that is less than the estimated price on the purchase order, the department's available balance of appropriations for supplies will be:

If supplies that were ordered by a department financed by the General Fund are received at an actual price that is less than the estimated price on the purchase order, the department's available balance of appropriations for supplies will be:

• A. Increased
• B. Decreased
• C. Unchanged
• D. Reallocated

Answer: (A)

When a department commits to a purchase with a purchase order, the government records an encumbrance that reserves part of the appropriations, reducing the available balance for supplies. If the goods are received for less than the estimated price, the encumbrance is reduced by the difference and the unused portion of the appropriation is released back to the available balance. In other words, the funds that were set aside for a higher estimate are no longer needed in full, so the department’s remaining available appropriations for supplies increase. This is why the correct outcome is an increase in the available balance.

When a department commits to a purchase with a purchase order, the government records an encumbrance that reserves part of the appropriations, reducing the available balance for supplies. If the goods are received for less than the estimated price, the encumbrance is reduced by the difference and the unused portion of the appropriation is released back to the available balance. In other words, the funds that were set aside for a higher estimate are no longer needed in full, so the department’s remaining available appropriations for supplies increase. This is why the correct outcome is an increase in the available balance.