Adjustments in General Ledger

Hello all,

I have an accounting question.

Expenses are not all showing in the budget. The amounts in the budget come from the General Ledger. In the General Ledger, there are expenses that have credits/adjustments that the HOA has not received money for. This lowers the amount shown in the budget from what the actual amount is.

Are these credits/adjustments without receiving money to cover them normally added to the General Ledger? And what type of expenses are these normally done with?

Thanks for your help.

Erika - I am not an accountant, but I am somewhat familiar with accounting terminology and processes. Your post is confusing to me due, I think, to the terminology you're using. In your two posts you've made reference to "general ledger", "budget", "income/expense" and "balance sheet". To clarify:

Journal - this records every movement of funds or transaction in the accounting system.

General Ledger - this is a listing of all of the accounts (or categories that account for funds), and for each entry in the journal, there are two entries in the ledger - one account is credited the amount, and another account is debited the amount. The accounts in the ledger fall into various categories such as income, expense, etc, etc.

Budget - is a prediction or allowance for how much funds will be posted against each of the accounts in the ledger for a given time period, usually a year.

Income/Expense - this is a report that covers a specific time period and shows the actual funds posted against those accounts in the ledger that are classified as income accounts and also those accounts that are classified as expense accounts. Not a tough concept here: money received - money spent = profit or loss over the time period.

Balance Sheet - this is a report as of a specific date that totals up the accounting systems assets, its liabilities and it equity. When correct, Assets = liabilities + equity.

Having said all of that, what is going on that you perceive is incorrect in your association from an accounting point of view?

Hello,

I believe it is the Cash accrual.

The reports are the General Ledger and the Income/Expense.

Thanks for the help.

Erika also I forgot to mention that the budget is an estimate of what the association expects it income and expenses to be for the following fiscal year. Some budgets include great detail, others not so much. The budget will not contain actual income and expenses since its really just the estimate of finances for the board to work within. Hopefully its a really good estimate and there is plenty of money on hand to pay bills.

Erika, it is typically one or the other.

Basically, in a cash basis method, income is accounted for when you receive an assessment payment and expenses occur when a check is written to pay them. Reports based on this system are typically easy to understand because it is similar to the family checkbook.

Basically, in an accrual method, income is accounted for (considered available for use) when the annual assessment is due (vs. when it is actually paid). Expenses occur when the expense is due (vs. when it is actually paid). Reports based on this system can be difficult to understand for those that are not used to this method.

My suggestion is to ask for some time to sit down with the treasurer or management company and have them answer your questions and explain the report.

Hope this helps,

Tim

Yes, it is cash.