CRM Financial Management & Budgeting 3

Question 1

Under accrual-basis accounting used in residential property management, rent revenue is recognized when:

Accepted Answer

It is earned (due), regardless of when collected

Answer

Accrual accounting records revenue when it is earned and expenses when incurred, not when cash changes hands.

Question 2

A property manager is asked to calculate the Debt Service Coverage Ratio (DSCR). The NOI is $480,000 and annual debt service is $360,000. What is the DSCR?

Accepted Answer

1.33

Answer

DSCR = NOI ÷ Debt Service = $480,000 ÷ $360,000 = 1.33, indicating the property generates 33% more income than needed to cover debt.

Question 3

Which of the following is classified as a fixed operating expense for a residential property?

Accepted Answer

Property insurance premiums

Answer

Property insurance premiums are contractually set for the policy period and do not vary with occupancy or usage, making them fixed expenses.

Question 4

A trust account for security deposits must be:

Accepted Answer

Kept separate and used only for purposes permitted by state law

Answer

State landlord-tenant laws require security deposits to be held in a separate trust account and used only for legally permitted purposes such as unpaid rent or damages.

Question 5

When a property manager prepares a monthly owner's statement, which item represents funds NOT available for distribution to the owner?

Accepted Answer

Reserve contributions set aside for future capital repairs

Answer

Reserve contributions are withheld from distributions because they are earmarked for future capital expenditures, not current operating profit.

(CRM) Certified Records Management Practice Test

(CRM) Certified Records Management Practice Test

CRM Financial Management & Budgeting 3