HOA Equity Reserves & Cash Accounting Question
Hello Quickbooks Community-- I have a HOA-specific question and was hoping someone with experience may be able to help me? I've seen @Rainflurry provide some super helpful answers on other HOA-related threads which I have also found super useful so thank you in advance to the community!
Background:
My HOA is just getting started up and we are using accrual basis accounting. In Quickbooks, we now have dedicated accounts setup in our COA (Cash & Equity) for both Operating and Reserve Funds. For FY'25, our operating P&L had a net surplus (Dues exceeded operating expenses for the year) which I understand should typically then be transferred via Journal Entry at Year-End to debit the P&L (resulting in FY'25 Net Income of $0) and then credit the Reserve Equity account (to increase Reserve Funds) on the Balance Sheet.
Questions:
What is confusing me is that when I make this journal entry at year-end to zero out my P&L, it is inflating my Reserve Equity account to a balance far greater than the Cash which is in our Cash Reserve account on the Balance Sheet. I suppose I was anticipating that my Reserve Equity and my Reserve Cash accounts should generally be similar $ values (perhaps not perfectly the same)... Should I also be transferring cash (for the same $ value as the Journal Entry) between my Operating Cash and Reserve Cash accounts? I hesitate to do this because with accrual accounting a P&L profit does not necessarily translate 1-1 to Cash.
Very much appreciate any perspectives you might be able to offer!
Thank you