bookkeeper says Board did not back her

Our bookkeeper (who is also a Board member) is upset. One of the owners questioned the monthly finanial statement that showed over $3,000.00 loss. When I got home this owner called me to talk about something. I thought it was some errors she found in the minutes (I am the Secretary). Instead she had questions about the monthly financial report. I told her she needs to talk to the bookkeeper about it. She told me she tried but the bookkeeper was not helpful. The bookkeeper told me that the owner did not talk to her. (Apparently this owner was going around the building complaining to high heaven about the report.) The bookkeeper said she called the lady to ask why she was going to other people instead of coming to her. I am not certain exactly what happened. The bookkeeper was accused of writing bad checks which she was not doing.

So I took time to go over the statement with this owner, I could answer one of her questions, but I needed to ask the bookkeeper to explain to me how the bank deposits could equal more than the income listed on the report.

So when I got home I called the bookkeeper and asked about it. She told me that the amount listed on the report is the amount she billed and since everyone does not pay the exact amount billed the amount deposited will show as more than the amount received. Some pay more and some pay for garage space rentals.

The next day the bookkeeper called me and told me she was hurt because we were questioning the statement she had prepared.

Now the bookkeeper is not answering any questions until the next Board meeting. She sent an email complaining that the Board did not back her.

Any bookkeepers out there who can explain more to me about how the amount deposited is greater than the amount received as shown on the financial statement.

I was not concerned about the monthly statement, because I know that other months there has not been a loss.

Tim, I tried to explain that I was not questioning it but lacked the knowledge to understand it and wanted her to explain it to me. This bookkeeper in my opinion is getting irrational again. She resigned last year in December, and then was nominated and accepted a Board position in February. In my opinion she was the main cause our annual meeting was late last year.

She had turned in her resignation from the Board to the President in October and then decided to stay on when another member resigned, then she decided to resign again and then decided not to resign from the Board. Now she is saying she was asked to resign. It wouldn't surprise me if she would post something on the bulletin board complaining about on or more Board members as she did last yr when I was not on the Board.

I did tell her I thought she was doing a good job as a bookkeeper and I could not do it. She did mention some bookkeeper get paid $155.00 an hr which is hard for me to believe. If that is the case, I want to sign up for a college bookkeeping course.

Bonnie,

Is your bookkeeper a professional bookkeeper or an accountant? Has she had any formal training?

I am not a bookkeeper, but I am in the business of preparing tax returns.

There are two main types of accounting methods: the cash method and the accrual method.

With the cash method, money is reported when it is constructively received (made available to you, whether it's actually in your possession or not) and expenses are recorded when the expenses (invoices) are actually paid. Most individuals use the cash method because it is simpler. If your bookkeeper uses the cash method, the money received and the bank deposits should be equal.

With the accrual method, money is reported when it is earned (billed) and expenses are reported when the invoices are received (not when paid). With the accrual method, the reported income may not equal the bank deposits. Many businesses use the accrual method, and generally must use that method if they carry inventory.

Businesses must tell the IRS which accounting method they are using, and once an election is made, the business cannot change the accounting method without IRS approval. Why does the IRS care? Because, for example, suppose a business received an invoice in December 2010 but it was not paid until January 2011. With the cash method, the business would report the expense on its 2011 taxes, whereas with the accrual method the business would report the expense on its 2010 taxes.

Perhaps an article in the newsletter will help explain things to the membership and put the board back in good graces with the bookkeeper.

The problem that can arise using the accrual method and having volunteers serve as treasurer/bookkeeping is that most individuals do not understand the accrual method and will inadvertently switch to the cash method because it's what they understand.

Here are links that might help with an article:

Nolo.com article Cash vs. Accrual Accounting

Business Owners Toolkit article Cash vs. Accrual Accounting

IRS Publication 538 Accounting Periods and Methods

Usually, there is a box for you to check indicating the accounting method on the tax form(s) you are required to file. On 1040 Schedule C it is on line F. On the standard corporate tax form, 1120, is is line 1 of Schedule K. There are other forms also.

Our tax preparer used form 2010. Should it also be listed on that form as to what method we use? I can't seem to find it.

Form 1120, Page 3, Schedule K, Line 1.

Usually, HOAs use Form 1120-H wich is simpler (1 page) and generally offers the greater tax advantage since all exempt function is non-taxable. However, if there is a lot of non-exempt function income, it is taxed at a 30% rate. In that case, filing Form 1120 may result in lower taxes. Also, if the proper income and expense ratios are not met, the HOA may not be able to use Form 1120-H and may be required to file Form 1120 instead.