Moving from accrual basis to cash basis

Started by PatriceY1 • 7 replies • 2360 views

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PatriceY1 (Maryland)
Posts: 4

Posted:

My HOA recently switched to a new management company. The old management company used accrual basis accounting. The new management company uses a cash basis. With the old management company, there were assessments receivable of $100K on the balance sheet. How would the HOA transition the $100K from accrual to cash basis. And, by the way, we are experiencing delinquencies and there is no way we are going to receive $100K in receivable assessments. What would be the accounting entry to get the $100K in assessments receivables off the balance sheet?

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Since your accounting is in the hands of the management company, I would think how to transition from an accrual method (ugh) to a cash method is best left up to the accounts at the management company.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By BruceF1 on 03/07/2012 3:02 AM
Since your accounting is in the hands of the management company, I would think how to transition from an accrual method (ugh) to a cash method is best left up to the accounts at the management company.

I mean, leave it up to the accountants at the new management company. That's what they're being paid for.

MattG2 (Kansas)
Posts: 16

Posted:

Pretty simple really,

If there's any interest in your historical IS, you'll back out the the revenue earned in prior periods and back out the receivable (both in 100k amounts).

Then you'll book revenue equal to the amount of future cash inflows as received.

Note this refers to the entry I have no idea how a change in the basis of accounting would impact CY taxes.

SharonG1 (Maryland)
Posts: 8

Posted:

Kind of off subject... my HOA is researching management companies. What company are you with now?

PatriceY1 (Maryland)
Posts: 4

Posted:

Thanks. The Board has left it up to the accountants at the new management company and they can't provide a recommendation. I'll try to reach out to others who may have gone through a transition from accrual to cash basis accounting. There's just a lot on the balance sheet that's not real money in a cash basis environment.

PatriceY1 (Maryland)
Posts: 4

Posted:

Thanks. I apologize, but what is IS? I'll investigate further about the tax implications.

PatriceY1 (Maryland)
Posts: 4

Posted:

If you could send an email to [email protected], I will send you the information. I can also tell you my experience with the transition. This is my community's 3rd property management firm. I am new to this discussion board. I couldn't find a way to send an email directly to a person. Thanks

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