Numerus HOA Services

Cash Basis vs. Accrual Basis Accounting for Homeowner Associations When it comes to accounting for homeowner associations (HOAs), two primary methods are used: cash basis and accrual basis. Understanding the differences between these two can help HOA board members and residents make informed decisions about their community’s financial management. Cash Basis Accounting Cash basis accounting is straightforward: transactions are recorded when cash changes hands. This means income is recorded when it’s received, and expenses are noted when they are paid. Cash basis accounting is more similar to what we use with our personal finances and is commonly used by small entities and small business. Pros: Simple to Understand : It’s easy to track money as it comes in and goes out, making it less confusing for those without an accounting background. Clear Cash Flow : It provides a clear picture of how much cash the HOA has on hand at any given time. Cons: Not Reflective of True Financial Position : ...

Homeowner Associations (HOAs) are tasked with managing the finances of their communities effectively. As a nonprofit corporation, most states require laws that require the corporation, in this case, the HOA, is required to keep financial records that are subject to the inspection of the members. Unfortunately, many board members that volunteer for the position do not have experience reading financial statements. Because one of the essential aspects of the board’s responsibility is maintaining accurate financial records and producing comprehensible financial statements, it’s important to understand these concepts. Understanding HOA financial statements is crucial for board members, residents, and anyone involved in the management of the community. Luckily, the basics aren’t as difficult as one might think. In this guide, we'll delve into the key components of HOA financial statements and shed light on some essential concepts that will help your board.   Balance Sheet: The ...