Please help me to explain the reason why we need an adjusting entry : Dr Expenditure ( or FB- nonspendable ???) / Cr Voucher Payable when using Purchase Method for Inventories? Please take a look at the file I attached below. I really appreciate your time and your answer. Thank you so much. Please answer asap, I have only 5hs from now to submit my hw.

Case 3 General Ledger Trial Balance at June, 30, 2014: Cash Taxes receivable Allowance for uncollectible taxes Due from other funds Supplies inventory, June 30, 2014 Estimated revenues Expenditures Expenditures - prior year Encumbrances Vouchers payable Due to other funds Reserve for encumbrances Reserve for encumbrances - prior year Fund balance - nonspendable Fund balance - unassigned Appropriations Revenues $ Debits 12,000 30,000 3,000 4,000 300,000 290,000 5,000 6,000 650,000 $ Credits 2,000 13,000 5,000 6,000 5,000 4,000 10,000 300,000 305,000 650,000 Adjustment '- To adjust the supplies expenditure and voucher payable accounts using purchase method Expenditure 2,000 Voucher Payable 2,000 Closing entries - To close the budgetary accounts Appropriation Estimated Revenues - To close revenues, expenditures accounts. Reserve for encumbrances - prior year Reserve for Encumbrances Revenues Expenditures- prior year Encumbrances Expenditures Fund Balance - unassigned 300,000 300,000 5,000 6,000 305,000 5,000 6,000 290,000 15,000 Millar City Fund Balance Sheet -at of June 30, 2014 Assets Cash Taxes receivable Less: Allowance for uncollectible taxes Due from other funds Supplies inventory, June 30, 2014 Total Assets $ 12,000 $ 28,000 3,000 4,000 47,000 30,000 (2,000) Liabilities and Fund Equity Liabilities Vouchers payable Due to other funds Total Liabilities Fund Equity Fund Balances: - Commited $ 6,000 15,000 5,000 20,000 - Nonspendable - Unassigned Total Fund Balances Total Liabilities and Fund Equity 4,000 $ 10,000 17,000 27,000 47,000 Check: Estimated Revenues Expenditures Expenditures- prior year Encumbrances Adjust- nonspendable (for inventory) Fund Balance - unassigned 300,000 10,000 290,000 300,000 5,000 305,000 6,000 5,000 2,000 17,000 Preclosing balance Appropriation Revenues Reserve for encumbrances - Prior year In accounting, expenditures are recognized as soon as a liability is incurred and inventories are reported as expenditure when purchased. A voucher payable is issued when payments have been made to recognize accounts payable. From the attachment given: Voucher payable; Bal b/d; 13,000+2,000adjustment will give 15,000 balance in the balance sheet. Expenditure; Bal b/d 290,000+5,000+2,000=297,000 the closing balance