CCS Financial Operations & Budgeting 2

Question 1

What is the primary purpose of a condominium association's reserve fund?

Accepted Answer

To fund future major repairs and replacements of common elements

Answer

Reserve funds are specifically designated to cover future major repairs and replacements of common elements such as roofs, elevators, and pavement.

Question 2

A condominium association collects $500,000 in annual assessments but spends $480,000 on operating expenses. The $20,000 surplus should be:

Accepted Answer

Transferred to the reserve fund

Answer

Best practice and many state statutes require surplus operating funds to be transferred to the reserve fund to build capital reserves.

Question 3

Which financial statement shows a condominium association's assets, liabilities, and equity at a specific point in time?

Accepted Answer

Balance sheet

Answer

The balance sheet (also called statement of financial position) presents assets, liabilities, and equity as of a specific date.

Question 4

A 'percent funded' reserve study result of 30% indicates that the association:

Accepted Answer

Has only 30% of the ideal reserve balance on hand

Answer

Percent funded measures the ratio of actual reserve balance to the fully funded target; 30% means the association is significantly underfunded.

Question 5

When an association borrows money to fund a major capital project, the loan repayment should be tracked in the:

Accepted Answer

Both operating and reserve budgets appropriately

Answer

Loan principal repayments typically appear in the reserve fund while interest expense may be reflected in the operating budget, depending on the association's accounting policy.

(CCS) Certified Condominium Specialist Practice Test

(CCS) Certified Condominium Specialist Practice Test

CCS Financial Operations & Budgeting 2