What is Prior Year Owners’ Equity?

Prior Year Owners’ Equity (also known as Unappropriated Members’ Equity, Excess Operating Funds, or Operating Reserves) represents the Association’s net income or loss since inception.  It is like a retained earnings account for a regular business.  It provides a cushion for operations and protects replacement reserves.  If the Association has unanticipated operating expenses that exceed the annual budget, this net loss can be funded from Prior Year Owners’ Equity instead of replacement reserves.

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