Dallas HOA Accounting Review
One thing that HOA Board members from Dallas, Fort Worth, Plano, Arlington and Coppell all have in common is that reviewing the financial statements that their Dallas HOA management company prepares is not their favorite part of the month. If you’re like most board members who live in a homeowners association in Dallas, you probably cringe at the thought of having to review your HOA’s monthly accounting. The thought of having to review hundreds of pages of HOA financials can make most people want to pull their hair out. As the experts in HOA management in the DFW area and across Texas, Spectrum Association Management presents our tip of the day to help guide your HOA Board of Directors back to the realm of the living:
HOA Management: Cash Accounting versus Accrual Accounting
The most fundamental question you should ask your Dallas HOA management company is whether they prepare your homeowner association’s financials using cash accounting or accrual accounting. In the Dallas area it is not uncommon for a professional homeowner association management companies to use either method; however, it is considered good practice to maintain books using the accrual method. While there are several differences between the two, the primary thing for your board of directors to keep in mind is that with cash accounting, an expense or revenue source is recorded at the time it is incurred. This means that if you’re using cash accounting, even though you know your HOA has a large water bill waiting to be paid it will not show up on your records until the check has been cut. With accrual accounting, by contrast, once the invoice is received it should be recorded as a payable and as an expense (even prior to a check being written to pay it) immediately. The result of this should increase both accounts. According to the matching principle, the period during which the expense is incurred should match the period of payment hence the double entry. This means it will show up on both your balance sheet and your income statement. Consult with your Dallas HOA management company for further clarification about your homeowner association’s financials and accounting basics.
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