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Financial Management - M100 Questions and Answers with Complete Solutions
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Financial Management - M100 Questions and Answers with Complete Solutions
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Financial Management - M100 Questions andAnswers with Complete Solutions
Revenue: The collective items or amounts of income which are appropriated for
common expenses.
Expenses: The cost of goods and services used to operate and maintain the
association's common elements.
- Operating expenses: for the normal and usual repairs for the association.
- Major improvement expenses: items added to improve the quality of life,
appearance of the property, or enhance property values.
- Reserve account: used to pay for long-term repair and maintenance issues. -
ANSWER What are the components of a Budget?
Uses the assigned percentage to determine each owner's prorata share.
(Total Assessments Required in Annual Budget * Percentage Interest as Found in
the Declaration) / Number of Installment Payments in a Year - ANSWER How
do you calculate assessments using the Percentage Method?
Equal method computation: assesses each owner equally for each lot or unit.
, (Total Assessments Required in Annual Budget / Number of Units) / Number of
Installment Payments in a Year - ANSWER How do you calculate assessments
using the Equal Method Computation?
- Mandatory line items—items based on community and owner needs and
requirements that the community is obligated to meet.
- Discretionary line items—items based on owner, board, and committee desires.
They are items people would like to have. They can also be voted out of the
budget. - ANSWER What are the two types of expenditures in a community
budget?
- Zero-base budgeting: All line items are set to zero and the amount of funds
allotted to each must be justified. The zero-base approach keeps you from
accepting this year's figures at face value.
- Historical trend budgeting: This method begins with the assumption that 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. - ANSWER What are
the two Expense Calculation Methods?
A reserve account consists of funds put aside—in reserve—for the replacement of
major components of a community's common property. - ANSWER What is a
Reserve Account?
- Meets legal, fiduciary, and professional requirements.
- Provides for the planned replacement of major items.
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