M100 MODULE 2: LESSON 3: FINANCIAL STATEMENTS WITH COMPLETE SOLUTIONS 100%

M100 MODULE 2: LESSON 3: FINANCIAL STATEMENTS WITH COMPLETE SOLUTIONS 100% What are two primary purposes of financial reports? - To provide their internal & external users with the information needed to make appropriate decisions on behalf of or regarding the community association - to enable the community association board and manager to control the community's financial operations. Three Accounting Methods 1) Cash Basis- This method records revenue when it is collected and expenses when they are paid 2) Accrual Basis- This method records revenue when it is earned (or accessed to owners) and expenses when they are incurred. 3) Modified Cash Basis: This method records revenue on the accrual basis and expenses on a cash basis with selected items recorded on an accrual basis. (aka modified accrual) most com,on type Brainpower Read More Statement of Revenue & Expenses A financial statement showing how much the organization makes or loses during a given reporting period; Also called earnings report; income statement; profit and loss statement; statement of operations Three major components of a statement of revenue and expense: a) Revenue: the earnings of the community association - Cash basis- revenues received and deposited - Accrual basis- revenues earned including assessments from owners but not received yet - modified cash basis- revenue is recorded on the accrual basis. b) Expenses- cost of goods and services used to operate and maintain the community's property - cash- amounts paid - accrual- amounts incurred whether or not paid -modified cash basis- generally reported on a cash basis c) Excess Revenue over Expense- amount left after deducting revenue into income. Loss expenses are greater than income Balance Sheet summary of a community's financial position at a specific point of time; balances what the community association owns (assets), what it owes to others e.g. typically prepared every month to monitor associations expenses Three major components of the balance sheet