What is encumbrance?

[Indhumathi v]

Meaning: A encumbrance is a limitation on the ownership of a property.

Statement format: In the real estate world, an encumbrance is similar to a lien.  The bond world also includes ENCUMBRANCE.  for instant, let’s consider a $100 million bond issue by company XYZ. let’s say that company XYZ is willing to pledge $100 million of its assets.

[kalaivaniG]

In accounting, an amount of money that one is required to spend on a stated thing in the future.

For example, a portion of the proceeds of a sale may be encumbered to pay for the cost of goods sold.

[Aravind Kumar]

Accounting: Acontingent liability, contract, purchaseorder,payrollcommitment,tax payable, orlegalpenaltythat ischargeableto anaccount. It ceases to be an encumbrance when paid-out or when the actualliabilityamountis determined and recorded as anexpense.

[nishat Parveen]

Encumbarance can be in many form like mortgages,easements and property tax lien.Not all encumbarances are financial.easements are non financial form

[jeevithakomu]

Eg :  A company xyz is willing  to  pledge 150 million of its assets to the bond holders giving them a little extra assurance that they will be paid on time in that case bonds would be considered securitized or asset backed  because assets have 150 million of encumbrances on them.

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