CMCA Practice Exam Terms/Questions and Answers

Statement of Revenue and Expense - ANSWER - This report shows the activity over a period of time & therefore will indicate the amount of income received & expenses incurred, whether actual or accrued, for all activity of the association through the 8 months of the fiscal year. The report may also show the amount of money in each budgeted line item for the entire year & amount remaining in each line for the last 4 months of the year. Your association just completed the eighth month of its fiscal year. Which financial report would be most useful to project year end expenses? - ANSWER - Statement of Revenue and Expense The best reasoning for recommending the modified accrual accounting method is that, compared to cash accounting, it: - ANSWER - More accurately reflects the associations financial condition Modified Cash Basis - ANSWER - Under the modified accrual basis, also sometimes referred to as modified cash basis, some accounts, such as assessment income are maintained on the accrual basis and other accounts, such as interest or other misc. income accounts and some expenses such as repairs, are maintained on a cash basis. The accrual of major expenses in particular, such as a contract for landscaping, trash removal, etc. regardless of non-receipt of invoices, gives the reader a much more accurate depiction of the association's financial standing, as the accruals serve to alert the reader to the recognition of obligations that the association must meet Community association managers must be familiar with Federal income tax requirements and options because: - ANSWER - Under the Federal tax code, all organizations are taxable on their income unless specifically exempted What are the two essential financial documents the board of directors should use to determine the amount of funds available for an unbudgeted expense? - ANSWER - Balance sheet and statement of revenue and expense Balance Sheet and Statement of Revenue and Expense - ANSWER - Shows the amount of money on hand in all association accounts as well as the allocated reserves at a given point in time; the statement of revenue and expense shows the activity in all budgeted line items over a period of time. Together, these reports can be used to determine expenses to date and funds available for the future Cash Basis - ANSWER - Income is recorded or recognized when received and expenses are recorded or recognized when they are actually paid On what basis is the community association reporting its finances when the financial reports indicate income when received and expenses when paid? - ANSWER - Cash basis The manager is not