Which statement best defines expenses in the context of a community association?

• A. Income from dues and assessments
• B. Costs of goods and services used to operate and maintain the property
• C. Replacement funding for future major components
• D. Tax obligations of the association

Answer: (B)

The main idea is what costs the association incurs to run and care for the property. Expenses are the ongoing costs of goods and services used to operate and maintain the property, such as maintenance contracts, utilities, landscaping, repairs, insurance, and management fees. These outflows come from operating funds and reduce the association’s net income for the period.

This differs from income, which comes from dues and assessments, and from reserve funding, which is money set aside to pay for future major replacements. Taxes can be a cost, but the broad definition of expenses is specifically the day-to-day operating costs needed to keep the property functioning and well cared for.