Certified Pennsylvania Evaluator Practice Exam

Funds set aside for replacing appliances typically come under which category?

1. Operating reserves

2. Replacement reserves

3. Capital expenses

4. Repairs budget

The correct answer is: Replacement reserves

Funds set aside for replacing appliances fall under the category of replacement reserves. This category specifically refers to money allocated for the future replacement of components or appliances that have a limited lifespan and are expected to wear out over time. By categorizing these funds as replacement reserves, it helps property managers and owners ensure they have the necessary finances available when it’s time to replace items, which is crucial for maintaining the property’s value and functionality. Replacement reserves are often calculated based on the expected useful life of each appliance or component, ensuring that adequate funds accumulate over their lifespan. This proactive financial planning is essential in property management, as it allows for smooth transitions when replacing appliances rather than relying on immediate cash flow without prior preparation.