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M100 Module 2: Lesson 3: Financial Statements QUESTIONS AND ANSWERS 100% CORRECT
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M100 Module 2: Lesson 3: Financial Statements QUESTIONS AND ANSWERS 100% CORRECT
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M100 Module 2: Lesson 3: Financial StatementsQUESTIONS AND ANSWERS 100% CORRECT
What are two primary purposes of financial reports? - ANSWER - To provide
their internal & external users with the information needed to make appropriate
decisions on behalf of or regarding the community association
- to enable the community association board and manager to control the
community's financial operations.
Three Accounting Methods - ANSWER 1) Cash Basis- This method records
revenue when it is collected and expenses when they are paid
2) Accrual Basis- This method records revenue when it is earned (or accessed to
owners) and expenses when they are incurred.
3) Modified Cash Basis: This method records revenue on the accrual basis and
expenses on a cash basis with selected items recorded on an accrual basis. (aka
modified accrual) most com,on type
Statement of Revenue & Expenses - ANSWER A financial statement showing
how much the organization makes or loses during a given reporting period; Also
called earnings report; income statement; profit and loss statement; statement of
operations
Three major components of a statement of revenue and expense: - ANSWER a)
Revenue: the earnings of the community association
- Cash basis- revenues received and deposited
, - Accrual basis- revenues earned including assessments from owners but not
received yet
- modified cash basis- revenue is recorded on the accrual basis.
b) Expenses- cost of goods and services used to operate and maintain the
community's property
- cash- amounts paid
- accrual- amounts incurred whether or not
paid
-modified cash basis- generally reported on a
cash basis
c) Excess Revenue over Expense- amount left after deducting revenue into
income.
Loss - ANSWER expenses are greater than income
Balance Sheet - ANSWER summary of a community's financial position at a
specific point of time; balances what the community association owns (assets),
what it owes to others
e.g. typically prepared every month to monitor associations expenses
Three major components of the balance sheet - ANSWER - Assets- anything
owed that has value e.g. property is not considered and asset.
- Liabilities- consist of what is owed to others or collected in advance
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