Understanding Your Financials

The financial statements provide an itemised report of the body corporate’s financial position at a particular time or for a particular period. A body corporate is not required to maintain a depreciation schedule in accordance with the requirements of ‘”Special Purpose Reporting”.

There are three main sections to the body corporate financial statements:-

• Balance sheet;
• Income and expenditure statements for the administration fund; and
• Income and expenditure statements for the sinking fund

Balance Sheet

The balance sheet reflects the overall financial standing of the body corporate at the date stated on the balance sheet. The balance sheet has two sections:  

• The owners’ funds section which reflects the balance of the administration fund and the sinking fund, and
• The asset and liability section

Assets of the body corporate may include the following:

• Cash at bank balance
• Investment or other bank account balances
• Any deposits, e.g. electricity deposit
• Outstanding contributions
• Any account that is to be received and relates to the financial year i.e. insurance claims receivable
• Any prepaid expenses that are for the forthcoming financial  years.
• Any debtor that the body corporate may have, i.e. lot owners (tenants included) who owe electricity payments (if applicable).

Liabilities of the body corporate may include the following:

• Accounts that have been received and are to be paid, e.g. invoices from tradesmen
• Any contributions paid in advance, meaning contributions that are not included in the financial period
• Accrued expenses that are accounts that are to be received but invoices not received.
• Any loans taken by the body corporate.

Income and Expenditure Statements for the Administration Fund and Sinking Fund

Income of the body corporate is mainly generated from issuing contributions. Under this section, unpaid discounts due to the late payment of contributions by lot owners, if applicable, may also be shown. It may also include any interest received from the bank accounts, penalty interest (if applicable) charged to owners who have outstanding arrears and any proceeds of rental fees or sales of the body corporate’s property.

Expenditure includes all the expenses that are incurred in running the body corporate such as repairs and maintenance, administrative costs, utilities e.g. common power, insurance, any fees to the council.

For those that do no understand the definition of arrears, it is a legal term for the part of a debt that is overdue after missing a singular or multiple required payments. The amount of the arrears is the amount accrued on the date from the first payment was missed.