Break down your expense accounts into more specific accounts such as “Legal Fees” and “Maintenance Supplies.” In doing so, you can more accurately track where your HOA’s money is going. A majority of experts and accountants agree that the Accrual Basis is the best accounting method to use. It’s the only method that gives you an accurate picture of your finances. hoa accounting Plus, it’s also the only method that conforms with the Generally Accepted Accounting Principles (GAAP). Whether you’re managing condos or mansions, you need a reliable accounting software that will help you keep tabs on your expenses and collect fees from your members the right way. The FreshBooks Cloud Accounting app is here to make your life easier.

The entire community association becomes ineffective if there is improper handling of finances. Properly detailed HOA financial statements are incredibly useful. Timely reports also help them effectively allocate funds for projects and maintenance. As your association earns revenue through monthly dues paid by the HOA community members, it is only fitting that the association’s financial practices should be in a healthy condition. Well-organized, detailed and specific records are a must, and transparency and internal controls within the association’s working structure are also crucial. We’ll offer specific tips and examples, including a sample chart of accounts for a property management company.

What Is an HOA Financial Statement?

Schedule a free demo today to see how DoorLoop allows you to streamline your property accounting and much, much more. The problem with this is that if you’re tracking your accounting on a notepad or even spreadsheets, it takes way too much manual input. Mortgage escrow accounts, land, buildings, and improvements are typically included here as well. However, that can get tricky come tax time, as the expenses will need to be identified somehow for both your accountant and the IRS. The basic idea is that, as a business grows, its number of accounts tends to grow in tandem. From there, you then break those primary accounts into sub-accounts.

• The Income Statement compares actual expenses and revenues reported for the period with estimated expenses and revenues reflected in the budget.
• The entries must be organized in order of account number — which is uniquely assigned to each account title (chart of accounts) — and by date.
• But, you will still document expenses in the general ledger as you disburse money.
• The Accounts Payable report shows you all of the association’s unpaid expenses.
• Using the Cash Basis of Accounting, you record income and expenses when money changes hands.

With that, you have the 101 on crafting a property management chart of accounts. The result is a fairly fleshed-out chart of accounts example template for property management. The below isn’t just a rental property chart of accounts, though. It can get complex, but when you break it down into steps, a chart of accounts for property management is pretty straightforward. Your chart of accounts provides a foundation for a sound business structure, so it’s worth investing the time (or professional help) in crafting one that does the job you need it to do. Below is the most complete guide to crafting a property management chart of accounts you’ll ever need.

How Do You Determine Fees for HOA Reserve Funds?

Using this method, the association records expenses when it incurs them, not when it pays them. The Balance Sheet will have an Accounts Payable liability section. As the HOA settles its balances, the association reduces its Accounts Payable and Cash balance. Most HOAs use the Accrual Basis, as it is generally thought to give the most accurate picture of your association’s actual financial condition.

Now that we’ve gone through the basics, it’s time to put it all together to see what our chart of accounts looks like. Our template below uses that form as a basis to make it as easy as possible to craft your chart of accounts. Remember; dealing with a bankruptcy is a very delicate process, and one that should not be taken lightly. If you’re unsure how to proceed or simply don’t want to invite possible legal action against your association, speak to an HOA lawyer or contact your HOA management company today. Still, it’s important to be considerate of the bankrupt homeowner. Understand their situation and never reveal the status of their financial health to other homeowners in the community.

Free HOA Templates

Depending on the size, scope, and complexity of your association, there will be a type of report best suited for your HOA. You may want to review the scope of each of the three different reports, as well as contact your HOA management company. But, as an HOA board member, you should do your part to at least understand the basics of accounting and financial management. After all, even experienced professionals aren’t invulnerable to committing mistakes.