CMCA - FINANCIAL Management Questions and Answers Already Passed

CMCA - FINANCIAL Management Questions and Answers Already Passed Base line funding ✔✔funding strategy to keep the reserve cash balance above zero. Chart of accounts ✔✔assigned numbers for all accounts in an organizati ...

CMCA - FINANCIAL Management Questions and Answers Already Passed Base line funding ✔✔funding strategy to keep the reserve cash balance above zero. Chart of accounts ✔✔assigned numbers for all accounts in an organization's general ledger. FHA ✔✔regulates and influences items such as required amount of insurance an association must carry, procedures for financial operations and requirements for the upkeep of the property. FNMA ✔✔may set requirements the community has to meet for owners to participate in their financing programs FHLMC ✔✔require certain types of insurance to be in place. Full funding ✔✔funding strategy to attain or maintain the reserves at or near 100% as called for on the component inventory. Historical Trend Budgeting ✔✔Method assumes existing line items are needed. The amount of funds allotted to each during the current year is adjusted for expected changes in the coming year. Major Improvement Expenses ✔✔not a required improvement; enhances,. Operating budget ✔✔includes operating expenses and major improvement expenses, but not replacement fund. Operating expenses ✔✔regular day to day, week to week, month to month or year to year expenses. Reconciliation of expenses and revenue ✔✔reconciling estimated expenses with anticipated revenue after drafting budget for the year. Replacement Fund ✔✔funds set aside - in reserve - for replacement of major components Reserve cash flow statement ✔✔shows the amount to be funded and the amount to be expended from the replacement fund over a given period of time. Reserve study ✔✔a budge planning tool that considers the current status of the replacement fund and determines a stable and equitable funding plan to offset the anticipated future major common area expenditures Threshold funding ✔✔Method is based on baseline-funding concept (keep reserve cash balance above zero) but with a minimum reserve cash balance set at a pre-determined dollar amount. Zero-based budgeting ✔✔all line items set to zero and the amount allotted to each must be justified. Acceleration ✔✔Collection of all assessments due through the end of the fiscal year. Chapter 7 bankruptcy ✔✔straight bankruptcy or liquidation; don't owe anybody anything Chapter 11 bankruptcy ✔✔Reorganization or a Corporation; allows for orderly payment to creditors Chapter 13 bankruptcy ✔✔Reorganization for Personal, non-corporate; pays off all or nearly all of debt over a specified period of time. Accrual basis of accounting ✔✔assumes everyone has paid; records income when it is earned (or assessed to owners) and expenses when they are incurred Audit ✔✔full blown - detailed examination to make sure conforms to GAAP. Balance Sheet ✔✔a summary of a community's financial position at a specific point in time; 3 major categories: assets, liabilities, and member's equity.; assets equal liabilities plus member's equity. Member's equity ✔✔represents the association's net worth at a point in time: assets minute liabilities equal member's equity (net worth). 2 categories of member's equity: Replacement Reserves and Operating Fund. Cash basis accounting ✔✔records income when it is collected and expenses when they are paid commercial reporting method ✔✔combines operating and reserve activities in the same column Compilation ✔✔minimal examination, no assurance that info conforms to GAAP. Review ✔✔less thorough examination; little assurance of conformity with GAAP. Engagement Letter ✔✔provided by a CPA upon being hired; describes the nature of the work to be done, type of report to be prepared, fee for services and time frame for the assignment FDIC ✔✔gov't agency guarantees investor's deposits in member institutions. Fund reporting method ✔✔prepares separate columns for operating, reserve, and any special funds. GAAP ✔✔Generally Accepted Accounting Principles: purpose provides uniformity among reports from different organizations Investment Yield ✔✔the return received on the investment Modified Cash Basis of accounting ✔✔most popular; records income and expenses on a cash basis with selected items recorded on accrual basis. Net income ✔✔the amount left after all expense deductions Net loss ✔✔occurs when expense are greater than income Representation Letter ✔✔letter from CPA that states that the information the association provides is true to the best of its knowledge Management Letter ✔✔separate report that often accompanies the audit or review; discusses the association's accounting system and controls and any weaknesses found in them during the audit plus any other comments on the association's finances. Statement of cash flows ✔✔summary of the flow of funds into and out of the association; summaries are prepared for normal operations, investment activities, and any borrowing activities. statement of income and expenses ✔✔records the associations financial transactions during a given period of time; usually for a given month, plus the fiscal year to date. Treasury Bills ✔✔short-term instruments that mature within 13, 26 or 52 weeks; issued in minimum denominations of $10K; anything larger must be in $5K increments; once purchased, the buyer receives the promised earnings; once matured the full face value is received. Treasury Bonds ✔✔notes mature in one to 10 years; bonds mature in more than 10 years. both issued in denominations of $1,000 to $100,000. Interest-bearing with interest paid every six months. once matured, the full face value is received. 1120 tax filing option ✔✔the association files as a regular corporation 1120H tax filing option ✔✔the association files as a homeowners association