A financial report should at minimum include which components?

• A. A statement of revenue and expenses with a comparison to the budget, and a balance sheet.
• B. A narrative summary of community events and a photo gallery.
• C. A cash flow projection for the next year and a list of vendors.
• D. A detailed property inspection report and insurance policies.

Answer: (A)

This question tests what a financial report must clearly communicate about how money is earned, spent, and what the association owns or owes. The minimum components are a statement of revenues and expenses with a comparison to the budget, and a balance sheet. The statement of revenues and expenses shows actual income and costs for the period, making it possible to see whether the association ran a surplus or deficit and to gauge performance against what was planned in the budget. Including a comparison to the budget is important because it highlights variances—where spending or revenue didn’t match expectations—so the board can manage resources going forward. The balance sheet, on the other hand, provides a snapshot of assets, liabilities, and members’ equity at a specific date, offering a clear view of liquidity and overall financial position. Together, they give a complete picture of how money was brought in and spent, and what the association owns versus owes. The other options either cover non-financial information or focus on future projections or non-financial documents, which aren’t part of the minimum financial report.