Making budget is an easy concept but then following one is a difficult task. However, expenses hardly go as planned and therefore at times as the month progresses you will like getting stuck thinking which expense to avoid and which one to select. However, when it comes to HOA accounting, agencies which provide these services take it a step ahead and make sure that they are the best when it comes to taking care of the expenses of the whole association. To know more about these methods visit www.clarksimsonmiller.com/hoa-accounting-milwaukee-wi/.
Know The Accounting Method
The board should make sure however that they talk and settle down a few things before hiring the HOA accounting service providers in order to make sure that you have hired the best. Usually, the HOA accounting service providers apply one of the three methods to do the accounting.
First basis of accounting is the accrual basis of accounting wherein the entire financial activity that HOA does is there on the financial statement of the association. This is one of the most stable and sure ways of accounting because the entire financial picture becomes clear. One of the many reasons why this type of accounting is preferred is because it is in line with the generally accepted accounting principles. GAAP principle applies that revenue is recorded in the financial statement when earned and expenses are recorded when incurred. It does not matter whether the cash is exchanged or not.
Second way of accounting is cash basis of accounting and the difference between the accrual basis and cash basis of accounting is that the later is not in line with the GAAP principles. In this all the revenue and the expenses are recorded only when received. As the name suggests, cash should be exchanged. Another, lesser popular method is modified accrual basis or modified cash basis which is used for interim reporting.