Accounting Accrual

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The 3 Methods of HOA Accounting and Financial Statements

We recommend that HOAs use the Accrual Basis of Accounting for financial statements. Learn the differences between accrual, modified accrual, and cash basis accounting, and how they affect your financials.

How to Adopt Accrual Basis Financial Statements for Your HOA

Accrual basis accounting gives a more complete picture of a homeowners association’s health and financial status than cash basis, making board members increasingly interested in converting their HOA’s financial statements to accrual basis. Accrual basis accounting provides a better matching of revenues and expenses for the period they are earned, not just as received.

§5305 - Financial Statement Review

Unless the governing documents impose more stringent standards, a review of the financial statement of the association shall be prepared in accordance with generally accepted accounting principles by a licensee of the California Board of Accountancy for any fiscal year in which the gross income to the association exceeds seventy-five thousand dollars ($75,000). A copy of the review of the financial statement shall be distributed to the members within 120 days after the close of each fiscal year, by individual delivery pursuant to Section 4040.

§5300 - Annual Budget Report

  1. Notwithstanding a contrary provision in the governing documents, an association shall distribute an annual budget report 30 to 90 days before the end of its fiscal year.
  2. Unless the governing documents impose more stringent standards, the annual budget report shall include all of the following information:
    1. A pro forma operating budget, showing the estimated revenue and expenses on an accrual basis.
    2. A summary of the association’s reserves, prepared pursuant to Section 5565.

§5200 - Record Inspection

For the purposes of this article, the following definitions shall apply:

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