Balance Sheet: A Snapshot of the Corporation’s Financial Standing
Definition and Purpose
A balance sheet provides a snapshot of the condominium corporation’s financial position at a specific point in time. It outlines the corporation’s assets, liabilities, and fund balances, ensuring transparency in financial reporting.
Components of a Balance Sheet
Assets:
Cash and bank account balances.
Accounts receivable (e.g., unpaid condo fees).
Prepaid expenses (e.g., insurance paid in advance).
Liabilities:
Accounts payable (e.g., unpaid vendor invoices).
Loans or outstanding debts.
Accrued expenses (e.g., wages payable, pending repairs).
Fund Balances:
Operating fund balance.
Reserve fund balance.
Any surplus or deficit from previous periods.
Operating Statement: A Summary of Revenue and Expenses Over a Period
Definition and Purpose
An operating statement (also known as a statement of revenue and expenditures) summarizes the condominium corporation’s income and expenses over a specific period, such as a month, quarter, or year.
Components of an Operating Statement
Revenue:
Condominium fees collected from unit owners.
Special assessments, if applicable.
Interest income or other miscellaneous revenue.
Expenses:
Maintenance and repair costs.
Utilities, insurance, and condominium management fees.
Legal and accounting fees.
Net Income or Deficit:
If revenues exceed expenses, the corporation has a surplus.
If expenses exceed revenues, the corporation has a deficit.
The operating statement helps the condominium board evaluate financial performance, determine if budget adjustments are necessary, and ensure that enough funds are available to cover upcoming expenses.
Key Differences Between a Balance Sheet and an Operating Statement
Feature | Balance Sheet |
Purpose | Shows financial position at a specific point in time. |
What it Reports | Assets, liabilities, and fund balances. |
Timeframe | Snapshot at a moment in time. |
Decision-Making | Used to assess long-term financial stability. |
Feature | Balance Sheet |
Purpose | Shows financial position at a specific point in time. |
What it Reports | Assets, liabilities, and fund balances. |
Timeframe | Snapshot at a moment in time. |
Decision-Making | Used to assess long-term financial stability. |
Using Balance Sheets and Operating Statements to Evaluate Financial Health
How to Analyze a Balance Sheet
Compare assets to liabilities to determine financial stability.
Ensure reserve fund balances are adequate for future repairs.
Identify any overdue accounts payable or outstanding debts.
How to Analyze an Operating Statement
Compare actual revenue and expenses to the budgeted amounts.
Identify overspending or under-collection of fees.
Ensure the corporation is generating enough income to cover operating costs.
