Balance sheet help

I am doing my best to figure out what the mc is trying to show with the balance sheet sent out. Besides the assets and liabilities we have equity, refunds, bank errors and retained earnings. It shows that we have $45,000 in equity and retained earnings. Equity in what? We are a HOA of a PUD. Every statement received shows this number increasing while the bank account decreases. The HOA owns nothing but the money in the bank to have equity in does it? The way I read this is the HOA has less than $4,000 in checking and savings and a CD for $500 that's it. When I go to the mc office it seems the girl that made the report is never at work and no one else can answer my questions. Any ideas?

I'm at the beach so no scanner, but this it.

Balance sheet for Jan 2013

ASSETS
Current Asseets
Checking/Savings
bank Gen Acct. 6,887.53
Reserve CD 526.12

Total checking and Savings 7,413.65

Accounts Receivable
Accounts Receivable -3,577.61
Total Accounts Receivable -3,577.61
Total Current Assets 3,836.04

Current Assets 3,836.04

LIABILITIES & EQUITY
Liabilities
Current Liabilities
Acounts Payable -28,102.87
Total Accounts Payable -28,102.87
Total Current Liabilities -28,102.87

Total Liabilities -28,102.87

Equity
Refund 280.00
Bank Error 1,737.46
Opening Bal Equity 11,826.93
Retained Earnings 28,746.53
Net income 2,173.02
Total Equity 44,203.94

Total Liabilities and Equity 3,836.04

Bank errors are listed because they correct mistakes in your budget - making things balance. That's all.

Retained earnings......

On your monthly balance sheet, you'll see near the Retained Earnings a line item called "Net Income." That's the money your HOA collected minus the bills it paid. If it's positive, you "made" money that month. If negative, you spent more than your monthly revenue collection.

Retained earnings builds on net income. At year's end, your HOA budget will have "made" money or "lost" money depending on how well your HOA collections matched your yearly expenses. So, on December 31st, your budget year ends and brand new budget starts from zero. If your overall net income for the year is positive by, for example, $5,000.....then your retained earnings would increase from $45,000 to $50,000. It closes the books.

If your yearly net income is negative, then your HOA lost money and your retained earnings will decrease by the negative cash amount. The budget resets and you begin your new budget year with zero expenses.

Over a period of years, your HOA has stayed under budget, so your retained earnings show a $45,000 positive number, accumulated over time.

While, over years, your HOA has accumulated $45,000 in wealth, it's obviously reinvested that cash, here and there, so that you only have $4,000 in cash.

I'm not a math person, but this is my explanation as I've asked my bookkeeper the identical question.

No, it is not unpaid fees.

You gave your HOA an artificial cash infusion with that special assessment while your expenses did not grow, creating wealth for your HOA....or retained earnings. You got it!

Even if you spent the $55,000....that money reduces a liability you had on your property that's listed on your Reserve Fund and balance sheet (roof, paint, pool, or something else).

Eventually, your retained earnings will be reduced towards zero dollars. I say that because your HOA needed a special assessment to do a project; it's not saving enough to pay for capital expenses by raising dues and placing cash in Reserve Funds.

TammyI, stated "We are in the process of taking over the management from the MC we have 11 owners and feel we can do it ourselves. I am thinking that this can be left off the monthly statements as not one of the owners knew what it meant."

Tammy, if your Board does not understand what is on a Balance Sheet and thinks retained earning is not needed, then I wonder in what areas besides accounting is there insufficient knowledge. Such as the legal aspects involved with property management. Your Board could bring in an accountant to provide knowledge on bookkeeping; and there may be free HOA seminars conducted by attorneys available free in your area which could be very helpful to your Board members.

PLEASE GET EDUCATED ON THE KNOWLEDGE NEEDED TO MANAGE AN ASSOCIATION BEFORE TAKING ON THIS RESPONSIBILITY.
PLEASE DO NOT PLACE YOUR ASSOCIATION, THE BOARD, AND YOURSELF IN LEGAL JEOPARDY!!