Which of the following is an example of operating expenses for a community association?

• A. Swimming pool management
• B. Contingent liability
• C. Demolition costs
• D. Reserve fund funding

Answer: (A)

Operating expenses are the day-to-day costs needed to run the association and keep the common areas functioning. Pool management fits this category because it is a recurring service that maintains the pool—labor, contracts, supplies, and utilities paid from the operating budget. It is consumed in the current period and does not create a long-lived asset.

In contrast, a contingent liability is about a potential future obligation and is recorded as a liability, not an operating expense. Demolition costs typically fall under capital expenditures because they relate to removing or replacing a major asset and are often capitalized rather than expensed in the operating budget. Reserve fund funding is money set aside for future major repairs or replacements; it is not an operating expense but a transfer to reserves used to fund capital projects later.