What does it mean?
Accrual accounting generally recognizes income when earned and expenses when incurred, rather than only when cash moves. Receivables and payables help connect transactions with the appropriate period. Recognition details and presentation should follow the framework selected with the association’s accountant.
Related names and search phrases: accrual basis. Usage can vary.
ILLUSTRATIVE COMMUNITY EXAMPLE
What it can look like
A fictional association records an approved December service expense before paying the vendor in January. Payment later reduces cash and the payable without treating the same service as a second expense.
Why your board should care
The approach can make period-by-period operating results easier to interpret when collections or payments cross month-end.
Keep the distinction clear
Tax accounting and financial reporting can have different requirements; this explanation does not select a method for your association.
Sources & scope
Sources consulted . These references support the explanation’s background; the examples and board questions are original editorial illustrations.
- IRS Publication 538: Accounting Periods and Methods ↗
January 2022 publication available at research time. General accounting timing; tax method eligibility requires professional review.
General educational explanations for HOA, POA, and condominium boards. Terms and procedures vary by state and governing documents. Examples are fictional. For a specific legal, tax, accounting, or property decision, consult a qualified adviser.
Prepared with AI assistance and source checking. Not represented as an attorney or accountant review.