If you missed our "Financials 101" webinar we have a comprehensive document here for you to keep! The "Financials 101" ebook covers topics discussed in the webinar including: * Methods of Accounting * State Rules and Regulations * The Five (plus one) Basic Financial Statement “Monthly Reports” * Community Association Fund Activity Summary Reports This ebook is free to all interested! Get your very own "Financials 101" ebook by completing the form to the right

1. OREGON | WASHINGTON | CALIFORNIA | NEVADA | ARIZONA
Community Management
Financials 101
Compliments of:
The Management Trust
www.managementtrust.com

2. In This eBook
•Information on the two
methods of accounting, and the
differences between the two.
•Examples of the five (plus 1)
Basic Financial Statement
“Reports.”
•Examples of monthly Financial
Statement Summaries.

3. Methods of Accounting
Cash Basis Accrual Basis
•Most basic method of accounting, can •Income recorded when earned, and
more aptly be described as “checkbook expenses recorded when incurred.
accounting.”
• Transactions are immediately recorded
•Records income on the same month into an Accounts Receivable or
that it received, and records expenses Accounts Payable account until cash is
when it is paid out. paid out.
•Effective for tracking cash flow, not •Effective at monitoring cash flow week-
designed when matching revenue and over-week.
money that has been set aside to cover
•Boards can easily ensure they have
expenses.
enough cash on hand for upcoming
expenses.
• Every community association management company uses one of these methods, or a
combination of both.
• Tailored accounting software for boards usually allows for either method to be employed.

4. What method is your
management company using?
• The Management Trust uses cash/accrual basis, as
determined by state law.
– California / Nevada / Washington: Must be on accrual or
modified accrual basis of accounting
– Arizona / Oregon: No required method
• For all other states, check with your community
association manager on the specific method used, or
consult your state’s treasury/general accounting
offices.
• For some items, it is not as important to be strictly on
an accrual basis.
– Example: Prepaid Insurance – When you pay for your insurance,
if your board pays $12,000 today for next 12 months, on a
accrual basis – that gets recorded into an asset account, and is
then allocated that over each month.

5. The Five (plus one) Basic Financial
Statement “Monthly Reports”
•Balance Sheet
•Income Statement
Year-to-Date (YTD)
•Budget Comparison
Standard
•Accounts Receivable
Delinquency
•Accounts Payable
Aging Detail
•General Ledger Detail

6. Balance Sheet
Shows the Assets,
Liabilities, and Equity.
Represents both the
operating fund and the
reserve fund.
Represents the
balances as of one
day in time.

7. Income Statement YTD
Represents current month
summary and YTD
summary.
Income reported at top.
Expenses reported at
bottom.
Net income represented
on bottom of sheet.

8. Budget Comparison
Compares the budgeted
amount to the actual
amount.
For the income section a
positive variance means
more funds were collected
than budgeted.
For the expense section a
positive variance means
more funds were spent than
budgeted.

9. Aging Delinquency
•Delineates the
homeowners that owe
the Association funds.
•Breaks the amounts
owed down based on a
standard 30/60/90
schedule.
•Categorizes the
collection status.

10. AP Aging Detail
•Delineates the amounts the
Association owes to vendors.
•Breaks the amounts owed down
based on a standard 30/60/90
schedule.
•The total AP is listed at the
bottom of the report in the center.

11. General Ledger Detail
• Nuts and bolts of all
transactions that
happened
throughout the
month.
• Individual
transactions for the
month.
• How those affected
different income and
expense items.

12. Community Association Fund Activity
Summary Reports
•Income and Expense
Statement Summary
•Accounts Overview
•Reserve Fund Summary

13. Operating Summary: Income and Expense Statement Summary
Shows prior
year funds.
Shows net income
for the year to
date.
Any accounts with a variance month over month are acknowledged with reason.

14. Operating Summary: Accounts Overview
Status of Shows total accounts
homeowners receivable balance,
Total accounts payable balance,
who have not Including the amount
including amount that is more
paid their dues. that is over 90 days
than 90 days past due.
past due.

15. Reserve Fund Summary
•Creates an income
statement for your
reserve funds.
•Shows status of board
funds at start to year
compared to YTD.
•What you have vs.
What you’re supposed
to have.
•Ensures you are
allocating money
appropriately each
month.

16. What to Remember
• Accrual Basis is preferred method of accounting for
community association boards, but state laws may dicate the
method your board uses.
• The Management Trust uses a hybrid of accrual and cash
basis.
• The Five (plus 1) Major Basic Financial Statement Reports
gives your board a comprehensive look the current and future
budget.
• Summary activity reports are great to share financial
information with entire homeowners association.

17. OREGON | WASHINGTON | CALIFORNIA | NEVADA | ARIZONA
The Management Trust is a leading national community association
management firm that specializes in serving condo associations and
homeowner associations across the United States.
With a combined 150 years of property management experience, we are
committed to providing the very best customer service to the community
associations that work with us. For additional information on our services,
visit the Financial Management section at ManagementTrust.com.
The Management Trust
15661 Red Hill Avenue, Suite 201
Tustin, California 92780