Demystifying Encumbrance Accounting: Definition and Recording As a business owner or accountant, it is crucial to have a clear understanding of encumbrance accounting. This accounting method helps you track and manage your financial commitments, ensuring that you have enough funds to cover future expenses. In this article, we will delve into the definition of encumbrance accounting and explore how to effectively record and manage encumbrances. What is Encumbrance Accounting? Encumbrance accounting is a method used to track and record commitments made by an organization for future expenses. These commitments can include purchase orders, contracts, or any other type of financial obligation that has not yet been fulfilled. By recording encumbrances,…