Condominium Financial Statements: Cash and Accrual Basis

One of the aspects that generates the most confusion among owners when the accounts are approved is understanding condominium cash and accrual accounting, that is, why the same document contains two apparently different accounting logics. On one side there is the cash ledger, which follows the cash basis and only records money movements that actually took place; on the other there is the balance sheet, which follows the accrual basis and shows receivables and payables regardless of whether they have already been collected or paid. Understanding how these two criteria fit together is essential to reading a condominium's accounts correctly.

The cash ledger and the cash basis principle

The cash ledger records, in chronological order, all income and expenses that actually passed through the condominium's bank account during the administrative year. If an invoice was issued in December but paid the following January, it does not appear as an outflow in the current year's ledger: it will appear in the year the payment was actually made. This criterion has the advantage of simplicity and immediate verifiability, because every line in the ledger corresponds to a real bank transaction that can be checked against the statements.

The balance sheet and the accrual basis principle

Alongside the cash ledger, the manager must prepare a balance sheet for the condominium, showing the receivables and payables outstanding at the close of the year, regardless of whether they have actually been collected or paid. This document includes, for example, instalments not yet paid by owners in arrears, supplier invoices received but not yet settled, and any residual balances owed to or from special funds. It is precisely this component that, combined with the cash ledger, produces a complete picture of the condominium's financial health.

How the two criteria fit together in the financial statement

The condominium financial statement, as set out in the applicable rules, is therefore a composite document: the cash ledger shows what has actually flowed in and out of the condominium's accounts, while the balance sheet completes the picture by showing what is still owed or still to be collected. A condominium can close the year with a positive cash balance while at the same time having a balance sheet showing unpaid supplier debts: only reading the two documents together reveals the true financial position of the managed entity.

Cost allocation and the explanatory summary note

The financial statement is completed by the cost allocation, meaning the distribution of expenses among owners according to the ownership shares or the criteria set out in the building regulation, and by an explanatory summary note, whose purpose is to make the most relevant items and the deviations from the previous year's approved budget understandable to owners who are not familiar with accounting. These two elements, together with the cash ledger and the balance sheet, form the complete package the manager must present for the assembly's approval.

• Cash ledger, cash basis, actual movements
• Balance sheet, accrual basis, receivables and payables
• Allocation of expenses among owners
• Explanatory summary note on the main items

Why both criteria are necessary

If the financial statement relied on cash alone, a condominium with many owners in arrears could appear balanced simply because it has not yet paid suppliers with the limited income available, masking an underlying liquidity problem. If it relied on accrual alone, it would lack a real snapshot of how much money is actually available in the account at a given moment. Combining the two criteria, while making the document more complex to read, offers a more faithful picture of the condominium's economic and financial situation.

A statement that shows only cash tells half the story, a statement that shows only receivables and payables tells the other half.

Common mistakes when reading the statement

Among the most frequent misreadings by owners is confusing the year end cash balance with the condominium's actual debt position: a positive cash balance does not automatically mean there are no outstanding amounts owed to suppliers, just as a negative cash balance does not necessarily signal financial distress if offset by receivables in the process of being collected from owners in arrears. Explaining this distinction at the assembly, perhaps with the help of the explanatory note, avoids disputes that arise from a partial reading of the numbers.

How digital tools support accounting management

Preparing both documents correctly, and keeping them consistent with each other throughout the year, requires a reliable accounting system that records cash movements while separately tracking receivables and payables as they arise. With AmministraPro the manager can handle both the cash ledger and the balance sheet of each condominium in a single environment, reducing the risk of mismatches between the two documents when the year closes. Readers who want to see in detail how this part of accounting management works can check the features page, while plan and pricing information is gathered in the pricing section.