What is HOA Balance Sheet And How To Read Them?Heywood Community Management

An HOA statement, also known as an accounts receivable statement, outlines the unpaid dues a property owner owes to the association. These dues may include overdue assessments, vendor credits, late fees, or other outstanding sources of revenue. This documentation consists of balance sheets, income statements, cash flow statements, and annual payable reports. It details the dues owed by each member to the HOA, covering expenses for trial balance maintaining shared areas and facilities like lobbies, pools, and clubhouses. Besides regular dues, it can also feature special assessments for unexpected expenses, typically reserved for emergencies or significant unforeseen events.

How to request HOA financial statements

For example, office equipment and machinery are typically fixed assets, while inventory—a tangible item—is a current asset. Audits require an outside opinion, and it is recommended that a Certified Public Accountant conduct the audit. They will check the records to ensure they comply with basic accounting principles, verify transactions to confirm the accuracy, and identify errors or inaccuracies. Accrual accounting is generally regarded as the “ideal” accounting method because it gives a more complete picture of the HOA’s financial status. The accrual basis does conform with GAAP, meaning it can be used for official recording and reporting.

HOA Accounting: How to Read Your Financials

A balance sheet template simplifies the process of organizing and presenting your financial data. By using a template, you can focus on analyzing your financial position rather than worrying about formatting or structure. Whether you’re a small business owner or part of a larger bookkeeping for cleaning business organization, a balance sheet template is a practical tool to streamline your financial reporting. The accounts payable is similar to the accounts receivable report but in reverse.

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• While it is perfectly acceptable to release financial and balance sheets annually, it is preferred to release them monthly or quarterly.
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These ratios, along with several others, give owners an idea of the association’s financial stability. While the balance sheet is an integral part of any HOA’s financial package, it usually requires the accompaniment of other reports to fully understand the association’s financial health. HOA balance sheets, whether prepared monthly, quarterly or annually, are a good representation of the daily operation of your community association. Negative equity on an annual sheet does not only mean that an HOA has lost money over the year, but it also means that day to day operations are flawed and need to be reconsidered. When using the Cash Basis, revenues are only reported once actual cash has come in, and expenses are only reported once money leaves the association. The downside to this method is assessments receivable, prepaid assessments, and accounts payable are not reported on the balance sheet.

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How to Create an HOA Budget: A Step-by-Step Guide with a Free Template

Whether you’re evaluating financial health, presenting to stakeholders, or preparing for a board meeting, clean, accurate data gives you the confidence to lead. Operating assets are the backbone of your daily business activities, powering the processes that generate revenue. These include everything from manufacturing equipment and machinery to inventory and point-of-sale systems.

Determine the Equity Ratio of your Community

Beyond all else, knowing how to read financial statements will help both boards and owners in preventing fraud. If only one person understands these reports, then it would hoa bookkeeping be easy for that person to cook the books and steal money from the HOA. Learning how to read financial statements will allow owners to spot any signs of fraudulent activity.