Why Should Assessments Receivable be Reconciled on Cash Basis Financial Statements?

The biggest weakness of a cash basis system is that assessment income and corresponding receivables are not reconciled. There is the chance that:

• => Assessment income may not be billed in full.
• Income does not agree with the budget on a cash basis set of financial statements so it is not known if all accounts were properly assessed
• => A/R could be written off without proper authority
• Without double entry, a unit owner’s account balance can be written off and no bad debt expense appears on the financial statement
• => Cash receipts could be incorrectly posted
• Either posted from another association or amounts received are not credited to owner account – they may just be posted to income

Thus, if you are preparing cash basis financial statements you MUST reconcile AR month to month.

This A/R reconciliation should be kept attached to the appropriate reports showing that the A/R aging report balances.