What is encumbrance accounting in SAP FIN-FSCM-TRM-TM - Transaction Manager?

SAP Term: encumbrance accounting

• Component: FIN-FSCM-TRM-TM

• Component Name: Transaction Manager

• Description: An anticipated expenditure, or funds restricted for anticipated expenditures, such as for outstanding purchase orders.

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• Key Concepts: 
  Encumbrance accounting is a method of budgeting and tracking financial commitments in SAP. It is used to monitor and control spending by creating a “reservation” of funds for a particular purpose. This reservation is known as an encumbrance, and it is tracked in the SAP system using the Transaction Manager (TM) component of the Financial Supply Chain Management (FSCM) module. 
  
  How to use it: 
  Encumbrance accounting is used to ensure that funds are not overspent. When a budget is created, an encumbrance is created for each item in the budget. This encumbrance is tracked in the SAP system and can be used to monitor spending against the budget. When a purchase order is created, the encumbrance is reduced by the amount of the purchase order. If the purchase order exceeds the amount of the encumbrance, an error message will be displayed. 
  
  Tips & Tricks: 
  It is important to ensure that all purchase orders are entered into SAP correctly, as this will ensure that encumbrances are accurately tracked and updated. Additionally, it is important to review encumbrances regularly to ensure that spending remains within budget. 
  
  Related Information: 
  For more information on encumbrance accounting in SAP, please refer to the SAP Help Portal or contact your local SAP support team.