5 Budgeting Terms You Should Know

Whether you just got elected to the community association board or you've served for years, you want to make a good impression. Knowing these common budgeting terms will help you get familiar with association finances while you get up to speed, or serve as the refresher you need to keep growing as a community leader. 

Budget: The financial plan for an association which estimates income and expenses for a specific time period.

Balance Sheet: The balance sheet is the report that reflects the association’s financial condition. Subtracting the dollar amount of liabilities from the value of its assets calculates the association's net worth. 

General Ledger: The general ledger contains the accounting record for each transaction in numerical order (chart of accounts) and occurrence (date order). This accounting tool provides the association and community manager detailed information for tracking the financial transactions of the association.

Reserves: Funds set aside by a community association for the future repair of, replacement of, or additions to major components the association is obligated to maintain such as the clubhouse, front gate or building envelopes. 

Statement of Income and Expense: The statement of income and expense is probably one of the most important management tools an association and community manager have available to them. The monthly review of the statement of income and expense will inform the association and community manager whether their actual spending is staying within the yearly budget (i.e. projected income to date and projected expenses to date). It also allows the board of directors to make educated decisions concerning expenditures for service.

By learning these five budgeting terms, you and your fellow board members will be more equipped to steer the association in the best financial direction and fulfill your fiduciary duty to responsibly handle the community's resources.