Healthy finances are critical to the sound operation of a community association. There are many factors that play into the financial management of an association, including accounting controls to protect the association’s assets, well thought out and implemented budgets to ensure there is enough operating capital to over the ordinary expenses of the association, and detailed reserve studies to provide enough capital for future capital expenditures. The following is intended to be a guide not only for association treasurers, but also for association boards of directors as a whole, as well as community managers.

I. THE BASIS FOR ACCOUNTING – CASH BASIS VS. ACCRUAL

A. General Comments
What is cash basis and accrual basis? These accounting terms can sometimes confuse the uninitiated board member or treasurer. As a manager or as a new or continuing board member or treasurer, you are confronted with decisions relating to leaking roofs, landscape contracts, unhappy members and guests, and now your accountant wants you to understand a new language! Don’t worry, once it is explained, it isn’t hard to understand. Don’t hesitate to ask for an explanation of unfamiliar terms and procedures–it’s your duty and your right to understand.

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