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Budget Basics – Grocery Shopping Example (2/2) Encumbrance • Picking up the toy obligates you to pay $15 • Groceries in the cart obligate you to pay $180 • Total Encumbered is $195 Budget Review & Analysis of Expenditure Fund Balance • Checking out at the register – money • You planned to spend $250 but leaves your wallet only had received $200 • Purchase Request and encumbrance • Of the $200, you spent $195. closed for the toy ($15) and groceries ($180). Total expended was $195 You have $5 in your pocket at the end of the trip (this is your fund balance) Unexpected Revenue (Grant, bank interest, etc.) Close out Fiscal Year • You find $20 unattended on the sidewalk • The trip is over, we had $10 remaining (surplus) after (unrestricted revenue). Your fund balance is now $5 both the shopping trip and restaurant meal which we can + $20 = $25 hold onto (fund balance) to use towards the next • You can now get ice cream, put gas in your car, etc. - shopping trip, or put it towards your car payment, or If you go to a restaurant planning to spend the $25 utilities, dinner, etc. (allocating fund balance in a new on dinner (you amended your budgeted year’s budget) appropriations to include $25 Restaurant Food) then • You want to assess your next shopping trip’s needs based receive a coupon for a free drink (grant), you can on your needs at the time. Just because you spent $15 on only use that coupon on a drink as specified. The a toy last trip, doesn’t mean its best to budget another $25 needs to cover your remaining meal. Lets say $15 for toys on your next trip. Similarly, you paid for the your bill comes to $15 which you pay in full. Your restaurant meal out of a one-time revenue source. You fund balance is now $25 - $15 = $10 should not plan another restaurant meal, just because you had that during your last trip (match appropriations to planned revenue sources) 7