Because most associations are created as nonprofit mutual benefit corporations, fund accounting rather than "profit and loss" is the more appropriate method of reporting monthly financial statements.
The operating fund is used for general operations of the association. The membership's monthly dues are deposited into this fund and operational expenses are paid from this fund.
The reserve fund is for those monies designated for long-term repairs and replacements and may only be withdrawn upon the signatures of two directors
Other funds can be created for special projects that may be paid for by (i) special assessments, (ii) litigation settlements, (iii) insurance payments, etc.