1. The Accounting Division
Chapter 12

2. Chapter 12 Objectives
Define the accounting division within the hospitality industry.
Apply generally accepted accounting principles to hospitality situations.
Explain the various tools used by the accounting department in hospitality setting.
Identify managerial accounting practices used in our industry.
Describe activities of the accounting division.

3. What is Accounting?

4. What is Accounting?
A compilation of financial data into useful reports for Managers to make decisions
Activities include recording, classifying, and summarizing financial data
Application of basic accounting practices to logically determine operational decisions

5. What is Accounting? (cont.)
Who Manages the Accounting System?
Top-Level managers are responsible for the financial stability of the hotel
Controllers or Bookkeepers are hired to account and summarize financial results
Controllers manage a team of accounting staff
Bookkeepers are usually hired in smaller operations

6. What is Accounting? (cont.)
Who Uses Financial Information?
Internal Users
All managers within the operation
External Users
Owners and Investors
Creditors and Lenders
Government Agencies
General Public

7. What is Accounting? (cont.)
Technology used in Accounting
Automated accounting systems
Property Management System or Point of Sales System
Computer Software (excel or QuickBooks)
Front of House uses system for daily activities which also captures general cash postings
Back of House uses system for payroll, collecting on accounts, and preparing financial statements

8. Accounting Principles & Practices

9. Accounting Principles & Practices
Generally Accepted Accounting Principles
Guidelines and rules used to keep standards among various industries
GAAP ensures all transactions are recorded and financial statements are prepared consistently

10. Accounting Principles & Practices
GAAP Principles
Unit of Measurement
Money – will note currency used
Historical Cost
Actual Costs are posted versus current market values
Going Concern
Assumption that business will continue to operate

11. Accounting Principles & Practices
GAAP Principles (cont.)
Conservatism
When in doubt, use conservative, practical amounts
Objectivity
Supporting documentation to prove all transactions
Realization
Postings occur when sale has been made and earned

12. Accounting Principles & Practices
GAAP Principles (cont.)
Matching
Expenses are recording in same period as the revenue
Cash Accounting
Accrual Accounting
Consistency
Use consistent accounting practices once adopted

13. Accounting Principles & Practices
Uniform System of Accounts
Standardization of formats and account classifications
Explains specific line items on each financial report
Each type of operation in the hospitality industry will have a Uniform System of Accounts to use

14. Accounting Tools

15. Accounting Tools
Operating Budgets
Formal plan which estimates the operations revenues and expenses
Commonly divided into monthly increments
Each department should participate in process
Used to determine revenue sources
Used to determine expenses and control when necessary

16. Accounting Tools
Income Statements
Determines actual revenue and expenses during a particular accounting period, typically monthly
Identifies the profitability of the operation
Can assist management when to control or cut expenses to stay profitable

17. Accounting Tools
Balance Sheets
The financial position of the operation on any given day
Good report for external users
Assets = Liabilities + Equity

18. Accounting Tools
Ratio Analysis Techniques
All reports must be able to be analyzed
Ratios help to relate the information in a more useful way
Useful Ratios include:
Food Cost Percentages
RevPAR Percentages
Return on Investment

19. Managerial Accounting

20. Managerial Accounting
Part of accounting that uses various analysis techniques and concepts to process historical and forecasted information for planning purposes

21. Managerial Accounting
Internal Controls
Procedures and processes adopted by the operation to protect its assets
Process of checks and balances
Measure of effectiveness to fix problem areas
Paperwork to support and control

22. Managerial Accounting
Other Techniques
Cost Analysis
Evaluation of cost in order to make a decision
Cost-Volume-Profit Analysis
Chart showing relationship of costs, volume, and profit which will determine a “break even” point
Cash Budgeting
Cash on hand to pay bills or make investments

23. Accounting Activities

24. Accounting Activities
Revenue Accounting
Posting of all revenues in the accounting system
Expense Accounting
Recording of all expenses incurred by operation
Payroll
Paying of employees following all government regulations

25. Purchasing

26. Buying of supplies needed by the operation
Purchasing
Buying of supplies needed by the operation
Usually handled by Purchasing Agent or often someone on the accounting team
Should buy quality products while controlling costs

27. Determining product of value and quality The Right Supplier
Purchasing
The Right Product
Determining product of value and quality
The Right Supplier
Trustworthy and consistent
The Right Price
Acquiring supplies at the right value
The Right Time
Maintain par levels and never run out

28. Purchasing Categories Food Equipment Supplies Services

29. Buying electronically Central Purchasing
E-Commerce
Buying electronically
Central Purchasing
One area for all units to buy supplies
Ethics
Honesty and making sound decisions for business
Supplier Relations
Win-Win