Current assets

Current Assets in a Homeowner Association

Current assets for a homeowner association (HOA) are vital components of financial management. They represent the resources that an HOA has at its disposal that can be converted into cash within a year. Current assets play a vital role in the day-to-day operations of the association, funding necessary expenses and investments.

Typical current assets for an HOA include cash, accounts receivable, and prepaid expenses. Cash refers to the money in the association’s bank accounts or on hand. Accounts receivable are the funds that homeowners owe to the association, which is expected to be paid within the year. Prepaid expenses are payments made in advance for goods or services that the association will receive in the future.

It’s essential for an HOA to manage its current assets effectively. This management includes maintaining sufficient cash to cover operational costs and investing excess cash wisely. The HOA board should regularly review its current assets and make necessary adjustments to ensure financial health and stability.

In the balance sheet of an HOA, current assets are listed and subtracted from current liabilities to determine the association’s working capital. Working capital is a key indicator of the association’s short-term financial health. A positive working capital suggests that the association can pay its short-term liabilities with its short-term assets.