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Hotel Financial Statements. Uniform System of Accounts. 1925 by Hotel Association of New York city 10th version revised in 2006. Special format for income statement and balance sheet for hospitality businesses Nature of the operations and organization of the hotels influences this format

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uniform system of accounts
Uniform System of Accounts
  • 1925 by Hotel Association of New York city
  • 10th version revised in 2006.
  • Special format for income statement and balance sheet for hospitality businesses
  • Nature of the operations and organization of the hotels influences this format
  • Revenue centers vs. support centers
  • Direct expenses vs. indirect expenses
  • Departmental income statements
  • Responsibility accounting
nature of operations
Nature of Operations

Hotel

Revenue Centers

Support Centers

Rooms

Food and Beverage

Telephone

Gift Shop

Rentals and Other

Administrative and General

Data Processing

Human Resources

Maintenance

Marketind and Sales

Departmental Income Statements

Expense Schedules

departmental income statements
Departmental Income Statements
  • Three major operating areas:
    • Rooms
    • Food
    • Beverage
  • Other significant revenue producing departments: Minor revenue centers
  • Food and beverage usually reported together
departmental income statements1
Departmental Income Statements
  • Includes revenues and expenses of that department only (direct expenses)

Revenues

-Allowances

=Net Revenue

-Cost of Sales

=Gross Profit

-Payroll and Related Expenses

-Other Direct Expense

=Departmental Income

(Contributory Income)

General Format

f b income statements
F&B Income Statements
  • Special feature of F&B Departmental Income Statements
    • Calculation of cost of food and beverage sold
      • Cost of food used
      • Transfers from/to beverage department
      • Cost of food sold
      • Employee meals and cost of promotion meals
      • Sale of scrap = reduction from cost of sales
cost of food sold pr 2 3

Beginning Inventory

14.753

+ Purchases

48.798

+ Transfers from bar

48

- Transfers from kitchen

107

Total Available

63.492

- Ending Inventory

12.811

Cost of Food Used

50.681

- Cost of Employee Meals

1.208

- Cost of Promotion Meals

410

Cost of Food Sold

49.063

Cost of Food Sold – Pr. 2.3
use of income statement
Use of Income Statement
  • Reveals important information
    • Sales volumes
    • Sales level and cost relations
    • Sales by departments
    • Operational effectiveness
    • Contributory income percentages
    • Budgets and comparisons of actual and budgets
hotel income statement
Hotel Income Statement

Rooms Dept. I+S

Food Dept. I+S

Beverage Dept. I+S

Total Departmental Income

Support Centers

- Undistributed Operating Expenses

= Income before Fixed Charges

Ownership Expenses

- Fixed Charges

= Income before Taxes –Taxes = Net Income

major categories of hotel i s
Major Categories of Hotel I+S

Revenue Centers

  • Operated Departments
    • Rooms
    • Food and Beverage
    • Minor Operated Departments
  • Undistributed Operating Expense
    • Administrative and General
    • Data Processing
    • Human Resources
    • Marketing
    • Property Operation and Maintenance
    • Energy Costs
  • Fixed Charges
    • Rent, Property Taxes, Property Insurance
    • Interest Expense
    • Depreciaiton and Amortization

Support Centers

Ownership Related Expenses

inventory valuation cost of sales
Inventory Valuation – Cost of Sales
  • Different inventory valuation methods
    • Specific item cost
    • First-in-first-out
    • Last-in-first-out
    • Weighted average cost
weighed average cost
Weighed Average Cost

Do Problem 2.4

restaurant departmental contributory income statement without allocation of indirect expenses
Restaurant Departmental Contributory Income Statement- Without allocation of Indirect Expenses
allocation of indirect expenses
Allocation of Indirect Expenses
  • Based on an allocation key
  • Artificial
  • In this example: assume
    • Administrative & General and Marketing expenses to be allocated on the basis of sales volume
      • Dining: 202,000/400,000 = 50.5%
      • Banquet: 108,000/400,00 =27.0%
      • Beverage: 90,000/400,000 = 22.5%
    • All others to be allocated on square foot basis
      • Dining room – 2400 sq.ft.
      • Banquet – 3000 sq.ft.
      • Service bar – 600 sq.ft.
balance sheet assets
Balance Sheet - Assets
  • Current Assets
    • Cash on Hand
    • Cash in Bank
    • Marketable Securities
    • Credit Card Receivables
    • Accounts Receivable
    • Inventories
      • Food and beverages, supplies
    • Prepaid Expenses
balance sheet assets1
Balance Sheet - Assets
  • Fixed Assets
    • Land, Building, Furniture and Equipment

-Accumulated Depreciation

    • China, Glass, Silver, Linen and Uniforms
    • Other Assets
      • Deposits
      • Investments
      • Leasehold costs and leasehold improvements
      • Deferred Expenses
balance sheet liabilities
Balance Sheet - Liabilities
  • Current Liabilities
    • Accounts payable
    • Accrued Expenses
    • Income Tax Payable
    • Unearned Income – Deposits and credit balances
    • Current Postion of Long Term Mortgage
    • Dividends Payable
  • Long Term Liabilities
balance sheet equity
Balance Sheet - Equity
  • Capital Stock
  • Capital Surplus – Paid-in-Capital in Excess of Par Value
  • Retained Earnings

Review Exhibit 2.8 and 2.9

Do Problem 2.7

balance sheet limitations
Balance Sheet Limitations
  • Historical cost: does not show market value
  • Some qualitative aspects totally ignored- such as goodwill
  • Human resources not treated as assets
  • Subjective matters such as depreciation
  • Shows result only for a moment – window dressing