Balancing the Bottom Line Understanding Your Building's Finances

 Not everybody on a co-op or condo's board is an accountant (or can even balance  their own checkbook, for that matter.) No doubt, handling large amounts of money for an entire building is a huge  responsibility. Residents, therefore, rely upon their board to make good  financial decisions on behalf of the entire community in an effort to protect  its individual and collective assets.  

 Although the terminology is different, and the dollar amounts and orders are of  a much larger magnitude, at a fundamental level, managing the finances of a  building is not so very different from managing your own finances. What is  prudent for the latter is prudent for the former, and the mistakes people make  managing their own money—using credit cards to pay for fixed expenses, for example—are the same ones board members often make.  

 Here are some financial basics, as well as a few common mistakes boards make  when dealing with their proverbial pocketbooks—and how your board can avoid them.  

 What Am I Looking At?

 "The financial statements of a co-op or condo contain the same basic information  as that of a commercial business," says Carl Cesarano of the Manhattan-based  accounting firm Cesarano & Khan, P.C. "The statements include the balance sheet, statement of revenues,  expenses and accumulated surplus or deficit—also known as retained earnings—statement of cash flows, and notes to the financial statements. Building boards  should use these financial statements in conjunction with a well-organized  management report."  

 According to Cesarano:

 A balance sheet reports assets, liabilities and the difference between the two,  which is referred to as stockholders’ equity (condos use the term "fund balance" or "members’ equity"). Assets are presented in order of liquidity, and liabilities are  presented in order of maturity.  

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