Why is the amount of our NET income on the balance sheet a total of our reserved plus our accounts receivable

Hi Sweeta50! I'm here to help you with your question and provide more information.

When you generate reports in QuickBooks Online (QBO), the accounting method you use is important. If you're using the Accrual basis, Accounts Receivable will be included in the Net income because it's considered as income. This is because under this accounting method, the report reflects income regardless of whether your customers have paid your invoices, and expenses regardless of whether you have paid all your bills.

To get the accurate total of your income, you can open the Balance sheet report on a Cash basis.

As for your other question, if there's any other offsetting entry that has to be made, I recommend consulting with your accountant. They can provide more expert advice in dealing with this situation. You may use our Find an Accountant tool if you don't have one.

If you need further assistance in managing your QuickBooks account, don't hesitate to visit us again. I'm always here to help you.

That probably should not be in accounts receivable.  Maybe more of an initial equity account since it's not income.

beware the advice of paid responders.  They give bad advice on originating funds and refuse to tell you how to zero an account if a mistake is made, so you end up with bogus accounts to balance errors.  Listen to advice from other users, not the employees.  Some, like AbigailS, directly lie!

@Sweeta50 

"We opened a money market account for our Reserves of $10,000.

Is there any other offsetting entry that has to be made in QB?"

I have been the treasurer of a couple HOAs.  When you open a MMA, the only entry is to create a transfer of $10K from your bank account to the MMA.  You can also do it with a Check/Expense transaction - just assign the MMA bank account to the Check/Expense.

"It seems to me that the NET INCOME appears to be a total of Accounts Receivable plus Reserves and this makes it appear we have more funds than we do since we are not to touch the Reserves unless there is a capital or catastrophic expense."

If you're using accrual basis accounting then, yes, your A/R (assuming the invoices are for income) will show as part of net income and that's correct.  The HOA should expense the amount put into reserves with a corresponding amount to an equity account called "Replacement Reserves".  You can do that monthly but at least annually.  The proper entry to do that is a journal entry that debits your Reserve Expense and credits the Replacement Reserves equity account (set one up if you don't have one).  That will reduce your net income by the amount put into reserves.  Then, when you need to pay for costs from the reserve equity account, assign the payment to an equity account called "Capital Expenditures" (set one up if you don't have one).  That will show as a negative equity amount and will allow you to quickly and easily see the amount put into reserves as well as the amount spent with just a quick look at the balance sheet.