Practical guide
Cash and accrual in the statement: how to read them
Anyone reading a condominium statement for the first time is often confused by two figures that seem to contradict each other: how much was actually collected and spent, and how much is owed or payable at year end. This is not an error but the consequence of the mixed nature of condominium accounts, which live with two different criteria: cash and accrual. The accounting register follows cash, the financial summary follows accrual, and only by reading them together do you get a truthful picture. This guide clearly explains what the two criteria mean, where they appear in the statement and how to use them to understand the condominium's real situation.
The cash basis: what actually came in and out
The cash basis records facts at the moment money moves: an expense is recorded when it is paid, a receipt when it arrives in the account. It is the most intuitive criterion and corresponds to what you see on the condominium's bank statement.
In the financial statement, the cash basis governs the accounting register, which records receipts and payments chronologically. Its strength is immediate verifiability: every movement must match a bank entry. Its limit is that it does not narrate commitments not yet honoured, such as an invoice received but not paid or an instalment due but not settled.
The accrual basis: what belongs to the financial year
The accrual basis assigns costs and revenues to the year they refer to, regardless of when payment happens. An expense accrued during the year belongs to that year even if it will be paid the following year, and an instalment due for the year belongs to it even if the owner has not yet paid it.
In the statement, accrual governs the financial summary, that is, the balance sheet, where receivables from defaulting owners and payables to suppliers for unsettled invoices appear. Accrual shows the real situation at period end, but does not say how much money is actually available in cash: for that you must return to the cash basis.
Why the condominium accounts are mixed
Article 1130-bis of the Italian Civil Code designs a statement that unites the two criteria: the accounting register on a cash basis and the financial summary on an accrual basis. This choice is not accidental but responds to the need to offer owners complete knowledge: on one hand the actual flows verifiable on the bank statement, on the other the snapshot of receivables, payables and funds at year end.
Case law has consolidated this mixed reading of the statement, stressing that neither criterion alone is enough to represent the management. A cash-only statement would hide arrears and debts; an accrual-only statement would hide the real liquidity. The coexistence of the two criteria is therefore a requirement of substance, not a formal complication.
A practical example to grasp the difference
Imagine a condominium that in December receives the elevator maintainer's invoice for 1,200 euro, but pays it only in January of the following year. Under the cash basis, that expense does not appear in the register of the year the invoice was received, because payment occurs later. Under the accrual basis, instead, it is a payable to the supplier belonging to the year the service accrued and must be recorded in the financial summary.
The same applies to instalments: if an owner does not pay the December instalment, on a cash basis that receipt is absent, but on an accrual basis the receivable from the owner exists and must be represented. Reading only cash would make the condominium look poorer, reading only accrual would make it look more liquid than it is: the truth lies in comparing the two.
How to use the two criteria to read the statement
For a correct reading, start from the accounting register to understand the real movements of the year, then move to the financial summary to check receivables, payables and funds at year end. If cash is positive but there are heavy arrears in the summary, the condominium is less solid than it looks; if there are unpaid payables to suppliers, the apparent liquidity must be reduced.
A management platform like AmministraPro keeps the two criteria aligned starting from the same daybook data, so that cash and accrual do not diverge because of entry errors and the owner can read both views coherently. On /funzioni you can see how the accounting register and the balance sheet are generated together, while /prezzi describes the plans. Understanding the difference between the two criteria nonetheless remains the basic skill for reading any statement critically.
Frequently asked questions
Does the condominium statement follow cash or accrual?
Both. The statement designed by Article 1130-bis of the Italian Civil Code is mixed: the accounting register follows the cash basis, recording receipts and payments when money moves, while the financial summary follows the accrual basis, representing receivables and payables accrued at year end. The coexistence of the two criteria serves to offer owners both the verification of actual flows and the snapshot of the condominium's real financial position.
Why might an expense not appear in the year's cash?
Because the cash basis records an expense only when it is paid. If an invoice is received in December but paid in January of the following year, on a cash basis the payment falls in the next year and not in the register of the year the invoice arrived. On an accrual basis, instead, that payable belongs to the year the service accrued and must be recorded in the financial summary. Comparing the two criteria avoids overlooking the expense.
Where do I find arrears in the statement?
Arrears are read in the financial summary, that is, the balance sheet, where they appear as receivables of the condominium from owners who have not paid the instalments due. In the accounting register, which follows cash, those receipts are simply absent, because the money did not come in. That is why you need to read both documents: cash shows the real liquidity, accrual shows how much the condominium still has to collect.
What does it mean that a payable to a supplier is on an accrual basis?
It means the cost belongs to the year the service was rendered, even if the invoice has not yet been paid. The payable to the supplier appears in the financial summary on an accrual basis, signalling a commitment that will reduce future liquidity. If you read only cash, the condominium would look richer, because that money is still in the account: accrual corrects this impression by showing the obligation still to be honoured.
Why is it not enough to read only cash?
Because cash narrates actual movements but hides commitments not yet honoured: owners' arrears and unpaid payables to suppliers. A statement read on a cash basis alone would make the situation look better or worse than it really is, depending on payment timing. Only by pairing it with the financial summary on an accrual basis do you get a truthful picture, with available liquidity on one side and outstanding receivables and payables on the other.
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