Purchase orders are issued in the amount of $427,000.

When a government issues purchase orders, it records encumbrances to reflect commitments against appropriations. This helps track budgetary commitments and avoid overspending.

The entry is recorded in the budgetary accounts (not proprietary accounts) as follows:

Debit Encumbrances: Recognizes the commitment

Credit Budgetary Fund Balance (or Reserve for Encumbrances): Reflects that part of the fund balance is committed

This is consistent with modified accrual accounting and standard governmental fund practice.

Relevant References:

GASB Codification Section 1300 – Budgetary Accounting

GFOA Best Practices – Encumbrance Accounting

GAO Principles of Appropriation Law – Encumbrance Controls

Answer: D. Debit Encumbrances $427,000; Credit Budgetary Fund Balance $427,000