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Encumbrance
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles
J Woelfel
(We recommend this as work of authority and you can order
it here)
The
term has two meanings:
(1) a claim or lien on real or personal property, such as a mortgage,
which diminishes the owner’s equity in the property; (2) a reservation
of part of a governmental appropriation that is recognized at the time
a commitment is made.
The purpose is to ensure that a period’s expenditures do not exceed
appropriations.
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