Financial statements will vary depending on the accounting method used. To fully understand the association's financial position, board members must know which method is being used.

The cash method is similar to keeping a checkbook. Cash is recorded when deposited in the bank Expenses are recorded when a check is written to pay a bill. This is the simplest of the three methods. It does not reflect unpaid bills or uncollected assessments. For example, If the board approves a contract for $50,000, that obligation does not show up on the statement until a check is actually written to the contractor. As a result. the financial statement could show the association had a cash surplus when, in reality, it would be overdrawn if the association paid all of its obligations. This situation does not happen often for most associations and is not problematic for most associations. More than 95% of associations use the cash method of accounting. When associations pay their contractors and vendors timely, payables are insignificant.

With accrual accounting, instead of tracking cash, this method tracks transitions. Income is recorded when earned, and expenses are recorded when incurred. for example, revenue is recorded when the association invoices owners, not when the money is actually received. The same is true for expenses. If the board approves a contract for $50,000, the expense is posted as payable though the money may not leave the bank account for another six months. Accrual accounting is difficult for most people to understand and is not used by many associations.

Associations may also use a hybrid method which is also not used very often.