HOA Accounting and Financial Statements Overview CSM

The automated HOA accounting software lets you send invoices, record payments, chart expenses and more with just a few clicks. All revenues that have been earned and all expenses that have been incurred will be reflected in the Income Statement; therefore, amounts will be comparable to the budget. Further, the Balance Sheet will include Assessments Receivable, Prepaid Assessments and Accounts Payable, and totals for each will agree to their respective detailed reports. All revenues of the association are reported when received, not when earned. Neither the Assessments Receivable or Prepaid Assessments accounts exists on the Balance Sheet when using the Cash Basis.

A CPA will do a routine checkup and make sure all records are accurate. An audit requires more work from the CPA to analyze https://www.bookstime.com/ the HOA’s financial situation. The CPA must verify that all the information in the HOA’s reports is correct.

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HOA accounting software automates many tasks in finance and produces a full range of financial statements. Useful for HOA boards and managers, this software helps to manage day-to-day tasks such as Balance Sheets, Income Statements, and Cash Flow Statements. Your financials are only as reliable as the practices and procedures that define them. As the association’s Board Members , you’re responsible for keeping accurate records and financial reports.

If there are irregularities, an audit can help the HOA identify and fix small problems early on before they turn into bigger issues. General Ledger — is the center of your HOA financial records, where you record every transaction, the transaction date, and numbering of those transactions. Balance Sheet — This keeps the details of your HOA’s assets vs its liabilities and where your HOA equity is found. Assets and liabilities should be balanced, providing an immediate view of how much money is in your bank account and what your HOA’s net worth is (using HOA accounting software).

Why an Experienced HOA Accounting Team Is Crucial

But, having some understanding of these various reports and what they entail will help you make that decision when all is said and done. Communication tools allow managers to get in hoa accounting touch with individual residents or send important community updates using mass or automated messaging. The truth is that homeowner’s associations (HOAs) are responsible for this.

Under this accounting method, revenues are only reported once the association has received money, and expenses are only reported once the association makes a payment. But, an association cannot use this method when preparing official financial statements as it does not comply with GAAP. Under the accrual basis, all financial activities of your HOA are reported on the homeowners association’s financial statements. Accrual accounting is generally regarded as the superior accounting method since it gives a more complete picture of you HOA’s financial health and status than the cash or modified accrual methods. The accrual basis, which is in conformity with Generally Accepted Accounting Principles (GAAP), means revenue is recorded when earned and expenses are recorded when incurred, regardless of when cash is exchanged.