Module 2: Financial Management - M100 With Solutions**

MODULE 2: FINANCIAL MANAGEMENT - M100 WITH SOLUTIONS** 1. Which accounting method recognizes revenue when it is received and expenses when they are paid? a. Cash basis b. Accrual basis c. Modified cash basis d. Modified accrual basis **Answer: a. Cash basis** 2. A ___________ occurs when expenses exceed revenue. a. Net income b. Net loss c. Net gain d. Net profit **Answer: b. Net loss** 3. Which of the following is not one of the three main sections of a balance sheet? a. Assets b. Liabilities c. Expenses d. Equity **Answer: c. Expenses** 4. True/False: A CPA's representation letter outlines the nature of the work, type of report, fee, time frame, and accountant disclaimers. **Answer: False** - This is covered by the Engagement Letter. 5. A ___________ is a financial report prepared by a CPA without assurance that it adheres to GAAP. a. Compilation b. Review c. Audit d. Opinion letter **Answer: a. Compilation** 6. Community associations must file a federal income tax return annually: True/False **Answer: True** 7. Which investment objective for community associations refers to how easily an investment can be converted into cash or a cash equivalent? a. Safety b. Liquidity c. Yield d. Treasury bills **Answer: b. Liquidity** 8. Each of the following statements about community association assessments is true EXCEPT: a. Assessments penalize residents for rule violations