Financial Statements

Report Title Last Updated Range Basis Description Balance Sheet Standard 04/11/2011 12:12 PM Last MonthYear To DateAll Accrual Indicates overall A/R. Shows total assests & liabilities Profit and Loss Standard 04/11/2011 12:12 PM Last MonthYear To DateAll AccrualCash Categorical breakdown of income and expenses. Vendor Balance Summary 04/11/2011 12:12 PM Last Month Accrual Contractors & Servicers balance summary Vendor Balance Detail 04/11/2011 12:12 PM Last MonthYear To DateAll Neither Breakdown of bills & payments by vendor

There always seems to be some confusion when it comes to accounting methods. Each method has advantages and disadvantages. Overall, the main differences between the two systems would be the timing of the transactions and when they are recorded.

Cash Accounting

With cash accounting you record income when it is received by the association and you record expenses at the time you write a check to a vendor.

The disadvantage with the cash method is you would not see the amount of assessments that were still owed to the association. In addition, with cash accounting, you would not see what checks still need to be paid or any amounts that may be owed, for instance, if the Association was making planned payments on an outstanding balance. Other problems would be if there are quarterly assessments or prepaid assessments, overstating the income for the month. In cases of quarterly income, it overstates the association?s income by 2 months. Cash accounting does not distinguish between current cash or prepaid cash.

The advantage of this method is that it more accurately portrays the amount of cash the association has at that point in time.

Accrual Accounting

With accrual accounting you record the income when it is billed to the owner, regardless of when the income (receivables) is actually received or paid. Expenses are recorded when you receive the goods or services (payables) even though you may pay at a later date.

The disadvantage is that your assessment income (recorded at the time it is billed) is overstated and as such you need several statements to understand the big picture of any delinquencies. That is why there are balance sheet items that record and account for these amounts that are owed or are unpaid.

The advantage of this method is that it more accurately reflects the overall financial health of the association. Income and expenses are matched for that reporting period, thus producing an accurate Net Income or Loss report.

Report Title Last Updated Range Basis Description Check Detail 04/11/2011 12:12 PM Last MonthYear To Date Neither Breakdown of bills paid by check Customer Balance Summary 04/11/2011 12:12 PM Last Month Accrual Homeowner account balances Customer Balance Detail 04/11/2011 12:12 PM All Accrual Detailed breakdown of homeowner accounts. Profit and Loss Detail 04/11/2011 12:12 PM Last MonthYear To DateAll AccrualCash Detailed breakdown of income and expenses Bank Statement 04/11/2011 12:12 PM Last Month Cash Account statement provided by the bank Secondary Bank Statement 04/11/2011 12:12 PM Last Month Cash Account statement for reserve, money market, etc.

There always seems to be some confusion when it comes to accounting methods. Each method has advantages and disadvantages. Overall, the main differences between the two systems would be the timing of the transactions and when they are recorded.

When comparing financial statements to a bank statement, always use a cash basis statement.

Cash Accounting

With cash accounting you record income when it is received by the association and you record expenses at the time you write a check to a vendor.

The disadvantage with the cash method is you would not see the amount of assessments that were still owed to the association. In addition, with cash accounting, you would not see what checks still need to be paid or any amounts that may be owed, for instance, if the Association was making planned payments on an outstanding balance. Other problems would be if there are quarterly assessments or prepaid assessments, overstating the income for the month. In cases of quarterly income, it overstates the association?s income by 2 months. Cash accounting does not distinguish between current cash or prepaid cash.

The advantage of this method is that it more accurately portrays the amount of cash the association has at that point in time.

Accrual Accounting

With accrual accounting you record the income when it is billed to the owner, regardless of when the income (receivables) is actually received or paid. Expenses are recorded when you receive the goods or services (payables) even though you may pay at a later date.

The disadvantage is that your assessment income (recorded at the time it is billed) is overstated and as such you need several statements to understand the big picture of any delinquencies. That is why there are balance sheet items that record and account for these amounts that are owed or are unpaid.

The advantage of this method is that it more accurately reflects the overall financial health of the association. Income and expenses are matched for that reporting period, thus producing an accurate Net Income or Loss report.