Accounting can make or break a society. When your society’s finances are handled meticulously and your treasurer or president is well aware of the income, expenses, outstanding payments, loans, etc, auditing the accounts would be a cakewalk for any auditor and he/she might as well make a wonderful example out of your management prowess.
However, when the income and expenses are not accounted for properly and there are too many discrepancies to count, well, your society’s finances will likely go downhill from here irking both the residents (after all, the monthly maintenance fee is a major chunk of income) and auditors.
In India, societies majorly follow the Single Entry or Double Entry Accounting systems. The key differences between these two systems and the impact they can have on a society are explored in this article.
Single Entry Accounting
1. Single entry accounting is majorly used in smaller societies where there is no large maintenance fee collection from the residency.
2. Smaller societies are unlikely to follow a proper bookkeeping process. Their entries may not be comprehensive.
3. They record the transactions on a cash basis and not on an accrual basis. Here, the cash transactions are recorded only when the payment is made and then the invoices are raised. However, Double Entry Accounting gives an estimation of all the transactions, upcoming payments, assets, and liabilities, etc.
4. The biggest advantage is, Single Entry Accounting will be useful for societies that do not require a skilled accountant to record financial transactions. Also, they do not require a large number of books/statements to record the limited number of financial transactions.
Double Entry Accounting
1. This system gives the idea to the Management Committee (MC) members or the treasurer about the total maintenance amount which needs to be paid by the residents, how much is pending to collect, and how much paid by them.
2. Likewise, they will also get a fair idea about how much they need to pay to the vendors from whom they are taking various services, and how much has been paid.
3. By following the accrual accounting method, the MCs can get a clear picture of the fixed assets they have, loans, and advances they have provided to their staff and outsiders, including vendors. They will also be aware of their liabilities such as loans borrowed by the association from banks, financial institutions, and other parties.
4. Accrual accounting comes as a big advantage for larger societies that have thousands of apartments. The treasurer or the Management Committee will get to know how much bank balance, cash, fixed deposit, and investments they have in their books of accounts of the association. This recorded information will come in handy when they have to submit their financial statements to auditors.
Financial maintenance: an obligation
It is imperative that the treasure or the Management Committee precisely knows how much maintenance fee they have collected from the residents, the amount paid to vendors, creditors, and other various parties. Likewise, they should also have updated information about fixed assets, loans, fixed deposits, investments, funds available in bank/cash, etc. This cash flow helps the management to run the society smoothly.
On the other hand, the treasurer, and the Management Committee are obliged to maintain these financial records. After all the residents entrust the treasurer with a portion of their income every month and hence, the management is answerable to the residents and must be able to present a satisfactory financial statement.
Apart from the residents, the management and treasurer should also be able to submit clear financial records to auditors, banks, and other legal entities. At some point, these documents can be used by the society to secure loans.
How can ApnaComplex be of help?
The ApnaComplex software is the only mature solution available in India today that offers an extensive Accounting module specifically conceived for the Indian gated communities. The software completely automates the accounting process in a society and simplifies the process for the treasurer or management.
– The software or app automatically reconciles the balance sheet eliminating the need for manual intervention.
– Payments can be paid through the app and when every transaction is digitally recorded, there are no suspense entries.
– ApnaComplex automatically generates defaulters and penalty collection reports. You can custom configure the software to send automatic notifications to the defaulting residents.
– You can configure the software to send auto-reminders to residents when maintenance dues are close.
– You can also configure the software to send recurring invoices to residents or vendors.
– When a resident default often and fails to pay dues on time on multiple occasions, the system allows you to block them from using certain facilities until the dues are paid. This improves your collection and minimises defaulters.
– ApnaComplex Budget Variance Report helps you to modify the budget of your society according to your needs. The app helps you keep track of your budget and will send reminders if you are close to the threshold.
– ApnaComplex offers 30+ Audit-ready financial reports. These comprehensive reports can be downloaded effortlessly during the time of audit streamlining the whole process.
– By using ApnaComplex diligently, a treasurer can save their time by 80%.
Though the Single Entry Accounting is straightforward to follow, it is evident that gated communities can benefit a lot by following the Double Entry Accounting system both in terms of legal obligations and welfare of the society.
To know more about our Accounting and other modules, visit apnacomplex.com