The Accounting Profession What It Is

Accounting is a Profession F Commercial/Financial F Cost F Tax F Auditing F Budgeting F Government

Users of Financial Information F Owner F Creditor F Manager F Government F Public

Financial Vs Managerial Accounting F Financial Accounting is historical F Managerial Accounting provides information, enhances controls, and plans for events

Managerial Accounting F Management is choosing from alternative courses of action F Managerial Accounting is concerned with serving internal decision makers

Managerial Accounting F Financial Accounting is concerned with serving external decision makers F Managerial Accounting links with Cost Accounting

Managerial Accounting F Provides Financial Statement Analysis and Interpretation F Performs Cost Volume Profit Analysis F Performs Cash Flow Analysis

End Products F Balance Sheet (Ch 2) F Income Statement (Ch 3) F Statement of Cash Flows (Ch 4)

The Hospitality Business An Overview

H o s p i t a l i t y I n d u s t r y R e s t a u r a n t s & F o o d S e r v i c e L o d g i n g T r a v e l & T o u r i s m C o n v e n t i o n s A t t r a c t i o n s S e r v i c e

The Hospitality Business F Hotels, Motels, Motor Inns F Over 100,000 Hotel Rooms in Orlando - and Growing F Industry Average Occupancy Rate - 70% (Rooms Sold Divided by Rooms Available)

The Hospitality Business F All Types of Food Service F Theme Parks F Transportation Services F Entertainment F Recreational Facilities

The Hospitality Business F Over 80 Mega Hotels (More Than 1,000 Rooms) F 50,000 Hotels in United States F Over 4 Million Guest Rooms

The Hospitality Business F Lodging $100 Billion F Food and Beverage $400 Billion F Lodging and Food and Beverage Equates to 5% of GNP

The Hospitality Business F F Food and Beverage Single Units F F McDonalds - Over 32,000 Units F F Clubs With Memberships From 200 to 15,000

Hotel Revenue F 64.1% Rooms F 19.5% Food F 5.1% Beverage F 7.0% Other Departments F 2.5% Telephone Department F 1.8% Rentals and Other Income

Hotel Costs and Expenses F 44.9% Salaries, Benefits and Meals F 30.0% Operating Expenses F 11.0% Cost of Sales F 5.5% Energy Costs F 8.6% Taxes, Management Fees, Insurance

The Hospitality Business F Seasonal Business F Fluctuating Demand F Short Conversion Time - Food F Selling Space - Now or Never F Labor Intensive F Intensive Fixed Asset Investment

Hospitality Accounting Careers F Chief Financial Officer F Controller or Chief Accountant F Director of Management Information Systems (MIS)

Hospitality Accounting Careers F Budget Director F Food and Beverage Controller F Internal Auditor F Cost Accountant

Key Driver in Hospitality F Paid Occupancy Percentage # rooms sold / # rooms available # rooms sold / # rooms available Assume Hotel has 200 rooms and sells 300 rooms in June 300 / (200 * 30) = 300 / 6,000 = 5.00%

Forms Of Business Organizations F Sole Proprietorship F Partnership F Limited Partnership F "C" Corporation F "S" Corporation F Limited Liability Company

A Review of Accounting A Quick Summary

Uniform System of Accounts F Industry Uses a Uniform System of Accounting F Lodging Operations, Restaurants, Clubs

Generally Accepted Accounting Principles F Provide Uniform Basis For Preparing Financial Statements F AICPA F FASB F GAAP

Principles of Accounting F Cost Principle F Business Entity F Continuity of the Business Unit F Unit of Measurement

Principles of Accounting F Objective Evidence F Full Disclosure F Consistency F Matching

Principles of Accounting F Conservatism F Materiality F Cash Basis Accounting F Accrual Basis Accounting

Cash vs Accrual F Cash Basis Accounting –Recognize revenue or expense when cash received F Accrual Basis Accounting –Recognize revenue when earned –Recognize expense when incurred

Fundamental Equation F Assets = Liabilities + Owners Equity F Assets = Liabilities + Permanent OE + Permanent OE + Temporary OE + Temporary OE F Assets = Liabilities + Permanent OE + Permanent OE + Revenue + Revenue - Expenses - Expenses

Fundamentals of Accounting F Balance Sheet Assets - Things Owned = Liabilities ( Obligations ) + Equity ( Residual Claims on Assets )

Fundamentals of Accounting F Income Statement Revenues - Expenses = Net Income Temporary Accounts are Netted and Closed to Equity (retained earnings)

Debits and Credits F Debits on Left F Credits on Right F Debits Must Equal Credits - Double Entry Bookkeeping

Debits and Credits F Debit does not mean increase or decrease F Credit does not mean increase or decrease

Normal Balances F Asset - Debit F Liability - Credit F Equity - Credit F Revenue - Credit F Expense - Debit

Normal Balances F Other Types of Accounts F Contra Assets - Credit –Accumulated Depreciation –Allowance for Bad Debt F Contra Equity - Debit –Withdrawals –Treasury Stock

Debit vs Credit F Assets and Expenses have a normal balance of a Debit –To increase the balance Debit –To decrease the balance Credit F Liabilities, Permanent OE and Revenues have a normal balance of a Credit –To increase the balance Credit –To decrease the balance Debit

Adjusting Entries F Needed to make transition from cash to accrual accounting F Example: Pay $3,600 for a 3 year insurance policy in January 2000 Fiscal year is July - June

Initial Entry (January 1, 2000)

June 30, 2000 Entry Prepaid Insurance Balance = $3,000

June 30, 2001 Entry Prepaid Insurance Balance = $1,800

June 30, 2002 Entry Prepaid Insurance Balance = $600

December 31, 2002 Entry Prepaid Insurance Balance = $0

Elements of Ethics F Privacy of Communication F Conflict of Interests F Political Contributions (U.S.) F Company Records F Gifts, Favors, Entertainment, Trips, Outings

Elements of Ethics F Use of Company Assets F Anti-Trust Laws F Relations With Competitors F Relations With Suppliers F Relations With Customers

Ethics and Hospitality Accounting F Is the Decision Legal? F Is the Decision Fair? F Does the Decision Hurt Anyone? F Have I Been Honest With Those Affected?

Ethics and Hospitality Accounting F Can I Live With My Decision? F Am I Willing to Publicize My Decision? F What If Everyone Did What I Did?