purpose of encumbrance accounting
An encumbrance is a reservation of budget funds that are set aside to make sure that actual expenditures do not exceed the available budget. If the encumbrance process is enabled, you can create purchase order encumbrances that are recorded in the general ledger when a purchase order is confirmed.Encumbered amounts can then be spent when vendor invoices that reference a purchase order are confirmed.f the encumbrance process is enabled, you can create purchase order encumbrances that are recorded in the general ledger when a purchase order is confirmed. Encumbered amounts can then be spent when vendor invoices that reference a purchase order are confirmed.