FUND ACCOUNTING

Association financial statements are typically reported on the “fund” accounting basis. Associations generally classify their accounts and transactions according to Operating and Reserve funds. The Operating fund is the fund designed to handle the day-to-day operations of the association: utilities, normal or reoccurring maintenance and repairs, routine monthly services, payroll, etc. The Reserve fund (also called the Replacement fund) is the fund segregated for major repairs or replacements expected to occur infrequently, such as: roof replacement, major roadway repaving, siding replacement, etc.

eplacements expected to occur of replacement, major roadway ment, etc.

An association’s governing documents (declaration, by-laws, etc.) require associations to establish and maintain a separate reserve fund or funds. The reserve fund is to be utilized for future major replacements or repairs, and should ordinarily not be used for operating

verning documents tc.) require h

, ly

ting

expenditures. Reserve fund cash accounts should be held in separate bank accounts apart from operating funds.

dh h BASIC FINANCIAL STATEMENTS

Most associations receive the following statements in their monthly financial statement package: 

  

 association’s financial statements are on the accrual method of accounting)

 Report

Balance Sheet

The balance sheet is a snapshot of the association’s financial position as of a given day (usually month-end or year-  balances of all assets, liabilities, and equity as of the date at the top of the report. The total assets should agree to the total liabilities and equity.

ld b h ld

Assets

The assets are the resources of economic value of the          association owns. Assets can typically include cash, receivables, prepaid expenses, and sometimes fixed assets.

Liabilities          may include – but are not limited to – accounts payable, accrued expenditures, deposits collected but not refunded, and loan notes payable.

accr col an

E T “f

typically ref

Equity or Fund Balance The equity accounts, or “fund balances”, as they are

typically referred to in this industry, are the difference between the association’s total the difference betwe

assets and its total liabilities. Think of the association’s equity as similar to an individual’s “net worth.” The s fund balances are usually segregated byl

assets and its total liabilities equity as similar to an ind association’s fund ba ances a operating and reserve funds, si Th

d b l l

operating and reserve funds, similar to the cash accounts. The fund balances are cumulative; they reflect all of thef association’s annual net income or losses going back to day one of the association’s existence.

         its total assets are greater than its total liabilities, and the association recognized more income than expenses  is negative (or shown in parentheses), its total liabilities are greater than the association’s total assets, and the association recognized more expenses than income through the years.

cai-il recruiter contest cai-illinois.org for details

Win a trip to the 2017 CAI National Convention in Las Vegas

Grand Prize Trip Value: $1750 2nd Place Prize: $500 3rd Place Prize: $250

 |