CMCA EXAM 2 EXAM PREP 2026 PRACTICE
SOLUTION STUDY GUIDE
◉ fund reporting method Answer: consists of preparing separate
columns for operating, reserve, and any reports from different
organizations
◉ GAAP (Generally Accepted Accounting Principles) Answer: their
purpose is to provide uniformity among reports from different
organizations
◉ investments Answer: involve the purchase of anything with
money value for the purpose of generating additional money over
time (e.g. savings accounts, certificates of deposit, U.S. Treasury
securities and stocks)
◉ investment yield Answer: the return received on the investment
◉ liabilities Answer: what is owed to others or collected in advance
(e.g. owner assessments received prior to the billed month)
◉ members' equity Answer: called the fund balance under the fund
method of reporting; it equals the difference between the
community association's assets and liabilities
,◉ modified cash basis of accounting Answer: method of recording
income and expenses on a cash basis with selected items recorded
on an accrual basis; modified cash varies in format depending on the
number of items accrued
◉ net income Answer: the amount left after deducting expenses
from income
◉ net loss Answer: occurs when expenses are greater than income
◉ notes to financial statements Answer: accompany the CPA-
prepared financial statements providing additional information to
help the reader understand the community association's financial
situation
◉ representation letter Answer: a document from the CPA that
states that the information the community association provides is
true to the best of its knowledge
◉ statement of cash flows Answer: a summary of the flow of funds
into and out of the community association; summaries are prepared
for normal operations, investment activities, and any borrowing
activities
,◉ statement of income and expense Answer: report that records the
community association's financial transactions during a given period
of time—generally for a given month plus the fiscal year to date; it is
a way to keep track of the community's financial activity
◉ treasury bills Answer: short-term instruments that mature in 13,
26, or 52 week periods; they are issued in minimum denominations
of $10,000—anything larger must be in
$5,000 increments; as soon as one is purchased, the buyer receives
the promised earnings, then, when the bill matures, the buyer
receives the face value (value indicated in the wording of the T-bill)
◉ treasury bonds Answer: whereas treasury notes mature in one to
10 years, these type of funds mature in more than 10 years; both are
issued in denominations from $1,000 to $100,000 and are also
interest-bearing with interest paid every six months; when either
matures, the buyer receives the full face value
◉ Actual Cash Value (ACV) Answer: the depreciated value of an item
◉ advertising injury Answer: these provisions in CGL
(comprehensive general liability) include language providing
coverage to the community association with respect to damages
resulting in "misappropriation of [marketing] ideas or style of doing
business" or "infringement of copyright, slogan or title"
, ◉ agreed amount endorsement Answer: provides for a mutual cap
of property insurance
◉ coinsurance Answer: a standard element in most property
policies that obligates the insured to maintain certain limit of
property insurance based on a stated percentage
◉ common declarations Answer: this section of the insurance policy
is like the title page of a book; it typically includes such information
as the name and address of the insured and the period of coverage
◉ common policy conditions Answer: these are the basic provisions
that apply to all insurance coverages in the package (e.g., when to file
proof of a loss or what happens when a premium is not paid)
◉ contingent liability Answer: covers the value of any undamaged
portion of a building which may have to be replaced because of
building laws
◉ contractual transfers Answer: this involves entering into a
contract that will, among other things, transfer the community
association's legal responsibility for any loss
◉ cross liability Answer: allows an owner to bring a claim against
his or her community association; this coverage is in the owner's
SOLUTION STUDY GUIDE
◉ fund reporting method Answer: consists of preparing separate
columns for operating, reserve, and any reports from different
organizations
◉ GAAP (Generally Accepted Accounting Principles) Answer: their
purpose is to provide uniformity among reports from different
organizations
◉ investments Answer: involve the purchase of anything with
money value for the purpose of generating additional money over
time (e.g. savings accounts, certificates of deposit, U.S. Treasury
securities and stocks)
◉ investment yield Answer: the return received on the investment
◉ liabilities Answer: what is owed to others or collected in advance
(e.g. owner assessments received prior to the billed month)
◉ members' equity Answer: called the fund balance under the fund
method of reporting; it equals the difference between the
community association's assets and liabilities
,◉ modified cash basis of accounting Answer: method of recording
income and expenses on a cash basis with selected items recorded
on an accrual basis; modified cash varies in format depending on the
number of items accrued
◉ net income Answer: the amount left after deducting expenses
from income
◉ net loss Answer: occurs when expenses are greater than income
◉ notes to financial statements Answer: accompany the CPA-
prepared financial statements providing additional information to
help the reader understand the community association's financial
situation
◉ representation letter Answer: a document from the CPA that
states that the information the community association provides is
true to the best of its knowledge
◉ statement of cash flows Answer: a summary of the flow of funds
into and out of the community association; summaries are prepared
for normal operations, investment activities, and any borrowing
activities
,◉ statement of income and expense Answer: report that records the
community association's financial transactions during a given period
of time—generally for a given month plus the fiscal year to date; it is
a way to keep track of the community's financial activity
◉ treasury bills Answer: short-term instruments that mature in 13,
26, or 52 week periods; they are issued in minimum denominations
of $10,000—anything larger must be in
$5,000 increments; as soon as one is purchased, the buyer receives
the promised earnings, then, when the bill matures, the buyer
receives the face value (value indicated in the wording of the T-bill)
◉ treasury bonds Answer: whereas treasury notes mature in one to
10 years, these type of funds mature in more than 10 years; both are
issued in denominations from $1,000 to $100,000 and are also
interest-bearing with interest paid every six months; when either
matures, the buyer receives the full face value
◉ Actual Cash Value (ACV) Answer: the depreciated value of an item
◉ advertising injury Answer: these provisions in CGL
(comprehensive general liability) include language providing
coverage to the community association with respect to damages
resulting in "misappropriation of [marketing] ideas or style of doing
business" or "infringement of copyright, slogan or title"
, ◉ agreed amount endorsement Answer: provides for a mutual cap
of property insurance
◉ coinsurance Answer: a standard element in most property
policies that obligates the insured to maintain certain limit of
property insurance based on a stated percentage
◉ common declarations Answer: this section of the insurance policy
is like the title page of a book; it typically includes such information
as the name and address of the insured and the period of coverage
◉ common policy conditions Answer: these are the basic provisions
that apply to all insurance coverages in the package (e.g., when to file
proof of a loss or what happens when a premium is not paid)
◉ contingent liability Answer: covers the value of any undamaged
portion of a building which may have to be replaced because of
building laws
◉ contractual transfers Answer: this involves entering into a
contract that will, among other things, transfer the community
association's legal responsibility for any loss
◉ cross liability Answer: allows an owner to bring a claim against
his or her community association; this coverage is in the owner's
