On an accrual basis, income includes revenues earned, including amounts assessed to owners but not yet received.

• A. Revenues earned and collected
• B. Cash receipts only
• C. Interest income only
• D. Revenues earned including amounts assessed but not yet received

Answer: (D)

Under accrual accounting, income is recognized when it is earned, not when cash is received. For a community association, that means assessments billed to owners are recorded as revenue at the time they’re earned, with an accompanying receivable if cash hasn’t yet been collected. So including amounts assessed to owners even if they haven’t been received reflects the accrual principle that revenue can be recognized before cash arrives. The alternative of only counting revenues that are collected would be cash basis and miss earned-but-uncollected revenue. Limiting to interest income ignores other revenue sources, and saying revenue is earned and collected excludes those where payment is still outstanding.