Other Comprehensive Bases of Accounting Pure Cash Basis

Financial statements presented using the pure cash basis only report transactions that affect cash and cash equivalents (money market accounts, certificates of deposit with maturities of 90 days or less). All receipts of cash are presented as increases to cash, and all cash outgoings are presented as cash decreases.

Receipts of cash are presented as increases to cash, and cash outgoings are presented as cash decreases.

Purchases of certificates of deposits would be recorded as cash disbursements. Acquisitions of property or

Modified Cash Basis

Not Recommended Use of a modified cash basis is not recommended. There is very little authoritative guidance for the modified cash approach other than requiring that modifications have substantial support.

Modified Accrual Basis

The modified accrual basis is very common for monthly financial statements prepared for common interest community associations. Assessments and other member charges are recorded when earned/billed which falls under the accrual method. Expenses are typically recorded when

Full Accrual Basis

The accrual basis of accounting is the most complete and accurate method for recording revenue when earned and expenses when incurred, regardless of when cash is received or paid.

The accrual basis of accounting is the most complete and accurate method.

A Comprehensive System Under the accrual basis, associations present a balance sheet that includes accounts receivable (assessments billed but not received) and prepaid assessments (assessments received from owners but not yet billed/earned), loans, deferred revenue, prepaid expenses, accounts payable.

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disbursements are made (cash basis). Sometimes expenses are also accrued. Modified accrual is a hybrid method requiring the reader to understand what revenue and expense accounts are recorded on the accrual basis and which are recorded on the cash basis.

Modified cash basis financial statements may present balance sheet accounts. Generally, it would be reasonable to record an account if the origination of the balance stemmed from a cash transaction. For example, assessments received in advance could be presented on the balance sheet since cash was actually received.

equipment would be recorded as disbursements when an association pays for the property. The “asset” would not be capitalized to the balance sheet and no depreciation expense would be presented.

If an association has a loan, any proceeds from the loan would be presented as cash receipts. Principal and interest payments should be presented as cash disbursements when they are made.

Reporting Recommendations

We recommend that only a statement of cash receipts and disbursements is presented. We do not encourage the use of a balance sheet when reporting using the pure cash basis.

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