Net Income/Loss & Retained Earnings

Questions arise from HOA boards about Net Income/Loss and Retained Earnings as found on their monthly financials. Net Income is the total of excess income over expenses, while Net Loss is the excess expenses over income.


Retained Earnings, by definition, is the balance of net income less losses over the years the association has been in existence; profits retained by the association. Retained Earnings is an equity account shown on the balance sheet.


The retained earnings (+/- net income/loss) amount is not indicative of how much cash the association has, but represents how much unobligated cash (assets) the association has. (Reserves are obligated to be used for roofing, paving, etc.)


Retained earnings amounts are NOT funds available in addition to what is shown in the assets section of the balance sheet.



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