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debbiek405
July 10, 2024
Question

Prepaid HOA fees

  • July 10, 2024
  • 1 reply
  • 0 views

The HOA's groundskeeping company required a downpayment of 1/3 of the annual contract price.  This was recorded as a debit to prepaid expenses and a credit to cash.  Each homeowner was charged for their share of this downpayment on their first invoice of the year. How are the homeowner payments for this fee categorize since they actually are paying for a 4 month period of this particular expense?  Is it considered a Prepaid Assessment liability?

1 reply

Rainflurry
Rainflurry
July 11, 2024

@debbiek405 

 

Assuming your HOA is a non-profit, IMO, this would be considered a maintenance reserve fund equity account.  Assign that equity account to the invoice item.  When the prepaid expense is applied to a bill, move a corresponding amount out of the maintenance reserve fund equity account and into an income account with a journal entry: debit maintenance reserve fund equity account, credit the appropriate income account. 

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