CMCA - FINANCIAL Management Questions and Answers Already Passed

CMCA - FINANCIAL Management Questions and Answers Already Passed Base line funding funding strategy to keep the reserve cash balance above zero. Chart of accounts assigned numbers for all accounts in an organization's general ledger. FHA regulates and influences items such as required amount of insurance an association must carry, procedures for financial operations and requirements for the upkeep of the property. FNMA may set requirements the community has to meet for owners to participate in their financing programs FHLMC require certain types of insurance to be in place. Full funding funding strategy to attain or maintain the reserves at or near 100% as called for on the component inventory. Historical Trend Budgeting Method assumes existing line items are needed. The amount of funds allotted to each during the current year is adjusted for expected changes in the coming year. Major Improvement Expenses not a required improvement; enhances,. Operating budget includes operating expenses and major improvement expenses, but not replacement fund. Operating expenses regular day to day, week to week, month to month or year to year expenses. Reconciliation of expenses and revenue reconciling estimated expenses with anticipated revenue after drafting budget for the year. Replacement Fund funds set aside - in reserve - for replacement of major components Reserve cash flow statement shows the amount to be funded and the amount to be expended from the replacement fund over a given period of time. Reserve study a budge planning tool that considers the current status of the replacement fund and determines a stable and equitable funding plan to offset the anticipated future major common area expenditures Threshold funding Method is based on baseline-funding concept (keep reserve cash balance above zero) but with a minimum reserve cash balance set at a pre-determined dollar amount. Zero-based budgeting all line items set to zero and the amount allotted to each must be justified. Acceleration Collection of all assessments due through the end of the fiscal year. Chapter 7 bankruptcy straight bankruptcy or liquidation; don't owe anybody anything Chapter 11 bankruptcy Reorganization or a Corporation; allows for orderly payment to creditors Chapter 13 bankruptcy Reorganization for Personal, non-corporate; pays off all or nearly all of debt over a specified period of time. Accrual basis of accounting assumes everyone has paid; records income when it is earned (or assessed to owners) and expenses when they are incurred Audit full blown - detailed examination to make sure conforms to GAAP. Balance Sheet a summary of a community's financial position at a specific point in time; 3 major categories: assets, liabilities, and member's equity.; assets equal liabilities plus member's equity. Member's equity represents the association's net worth at a point in time: assets minute liabilities equal member's equity (net worth). 2 categories of member's equity: Replacement Reserves and Operating Fund. Cash basis accounting records income when it is collected and expenses when they are paid commercial reporting method combines operating and reserve activities in the same column Compilation minimal examination, no assurance that info conforms to GAAP. Review less thorough examination; little assurance of conformity with GAAP. Engagement Letter provided by a CPA upon being hired; describes the nature of the work to be done, type of report to be prepared, fee for services and time frame for the assignment FDIC gov't agency guarantees investor's deposits in member institutions. Fund reporting method prepares separate columns for operating, reserve, and any special funds. GAAP Generally Accepted Accounting Principles: purpose provides uniformity among reports from different organizations Investment Yield the return received on the investment Modified Cash Basis of accounting most popular; records income and expenses on a cash basis with selected items recorded on accrual basis. Net income the amount left after all expense deductions Net loss occurs when expense are greater than income Representation Letter letter from CPA that states that the information the association provides is true to the best of its knowledge Management Letter separate report that often accompanies the audit or review; discusses the association's accounting system and controls and any weaknesses found in them during the audit plus any other comments on the association's finances. Statement of cash flows summary of the flow of funds into and out of the association; summaries are prepared for normal operations, investment activities, and any borrowing activities. statement of income and expenses records the associations financial transactions during a given period of time; usually for a given month, plus the fiscal year to date. Treasury Bills short-term instruments that mature within 13, 26 or 52 weeks; issued in minimum denominations of $10K; anything larger must be in $5K increments; once purchased, the buyer receives the promised earnings; once matured the full face value is received. Treasury Bonds notes mature in one to 10 years; bonds mature in more than 10 years. both issued in denominations of $1,000 to $100,000. Interest-bearing with interest paid every six months. once matured, the full face value is received. 1120 tax filing option the association files as a regular corporation 1120H tax filing option the association files as a homeowners association