Thus, it’s important for board members to understand which method the association will use. Each accounting method comes with unique advantages with a different effect on HOA finances. While it’s not mandatory to seek help from an accounting firm, it may be required to have an independent third-party audit or review the association’s books once a year. It’s mandatory to use specific accounting methods in some cases. This report shows the amount the HOA spent for the time period compared to the budgeted amount for the period. This statement shows transactions for a certain time period - usually one month, quarterly, or annually. This report will show how much money is in the HOA’s bank account. The Balance Sheet explains the association’s financial situation by comparing assets minus liabilities to give a net worth. These accounting methods will be used to prepare several important financial reports for the homeowners association. In most states, homeowners associations can choose one of three bases of accounting to prepare interim statements: There are several methods that may be used to prepare your HOA’s financial statements. To understand the association’s financial position, board members must have an understanding of the accounting method used. This way, they can prepare the association for maintenance, repairs, homeowner bankruptcy, and even financial dishonesty. Therefore, it’s important for all board members to know how to understand and analyze financial reports. Poor reporting can make an already immense obligation harder to manage. This job can be complicated by inaccurate or incomplete financial reports. Board members have a responsibility to understand financial interim statements to guide the association’s financial course. HOA accounting is an important aspect of running a homeowners association, but it can be a tedious task.
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