1. FINANCIAL MANAGEMENT GUIDE © Marin Management, Inc. 1 7200. Financial Reporting Guide, 7234 Income Statements A. The Purposes of Income Statement The Income Statement (also called Profit and Loss Statement and P&L) reports revenue, expense and profit information for specific financial periods. It is the essential tool for measuring past financial performance. B. Responsibility, Distribution and Timeliness The accountant is responsible for preparing, checking and distributing Income Statements with other financial statements according to the schedule described in the Financial Statements section of this Guide. Continue ►

2. FINANCIAL MANAGEMENT GUIDE © Marin Management, Inc. 2 7200. Financial Reporting Guide, 7234 Income Statements C. Departmental Format and Schedules Income Statements for the lodging industry are departmentalized. That is, they have schedules for each hotel department and a recap page summarizing hotel totals. We departmentalize revenues and expenses for the following reasons:  So that we can evaluate the financial performance of each department as a profit center;  To comply with lodging industry standards for financial reporting;  So that department heads and supervisors can be held accountable for the financial performance of their areas of control; and  So that we can identify and correct specific areas of deficient financial performance. The Uniform System of Accounts for the Lodging Industry (USALI) has specific requirements for each schedule of the Income Statement.Uniform System of Accounts for the Lodging Industry (USALI) Continue ►

3. FINANCIAL MANAGEMENT GUIDE © Marin Management, Inc. 3 7200. Financial Reporting Guide, 7234 Income Statements C. Departmental Format and Schedules (Cont) According to USALI standards, the Income Statement pages are presented in the following order:USALI Hotel Recap Schedule 1, Rooms Department Schedule 2, Food and Beverage Schedule 2-1, Food Department Schedule 2-2, Beverage Department Schedule 3, Other Operated Departments Schedule 3-1, Telecommunications Department Schedules 3-2, etc., Other Operated Departments (parking, minibar, etc.) Schedule 4, Rentals and Other Income Continue ►

4. FINANCIAL MANAGEMENT GUIDE © Marin Management, Inc. 4 7200. Financial Reporting Guide, 7234 Income Statements C. Departmental Format and Schedules (Cont) Schedule 5, Administrative & General Schedule 6, Sales Department Schedule 7, Property Operations Schedule 8, Utilities Schedule 9, Management Fees Schedule 10, Rent, Property and Other Taxes Schedule 11, House Laundry Schedule 12, Employee Cafeteria (if applicable) Schedule 13, Payroll-related Expenses Other Statistics Continue ►

5. FINANCIAL MANAGEMENT GUIDE © Marin Management, Inc. 5 7200. Financial Reporting Guide, 7234 Income Statements C. Departmental Format and Schedules (Cont) Revenue departments have revenue lines on their departmental schedules; non-revenue departments do not. Some departments have labor expense and some do not. Following is a summary: Departments typically with payroll: Rooms department Food department Beverage department Telephone department (only if there are telephone operators) Administrative and general Property operations (maintenance) Sales and marketing House laundry Employee cafeteria (if applicable) Continue ►

6. FINANCIAL MANAGEMENT GUIDE © Marin Management, Inc. 6 7200. Financial Reporting Guide, 7234 Income Statements C. Departmental Format and Schedules (Cont) Departments typically without payroll: Rentals and other income Utilities Management fees Rents, property and other taxes Payroll departments have lines for salaries and wages, payroll taxes and benefits on their departmental pages; non-payroll departments do not. One department—house laundry—has its entire expense total allocated to other departments based on a predetermined allocation. Continue ►

7. FINANCIAL MANAGEMENT GUIDE © Marin Management, Inc. 7 7200. Financial Reporting Guide, 7234 Income Statements D. Income Statement Columns In addition to the title column, the Income Statement contains at least six columns separated into two sections of three columns each. The two sections are titled as follows: Current Period (or Current Month)Year-to-Date The columns within both of those sections are titled as follows: Actual BudgetLast YearActual Budget Last Year Most have columns for percentages, and some add columns for variance from the prior periods. Continue ►

8. FINANCIAL MANAGEMENT GUIDE © Marin Management, Inc. 8 7200. Financial Reporting Guide, 7234 Income Statements E. Checking the Income Statement before Distribution The accountant checks the Income Statement before distribution for two things: Reasonableness and Balancing "Reasonableness" means checking the Income Statement for obvious errors, such as the following:  Unusually large numbers  Negative numbers that are usually positive  Zeros in accounts that usually have amounts  Error messages  Percentage cells that did not calculate  Statistical entries that added into dollar totals Continue ►

9. FINANCIAL MANAGEMENT GUIDE © Marin Management, Inc. 9 7200. Financial Reporting Guide, 7234 Income Statements E. Checking the Income Statement before Distribution (cont.) Balancing means checking certain relationships of numbers within the Income Statement and between the Income Statement and the Balance Sheet. Check the following before distributing the Income Statement: Balance Sheet 1. The net profit for the current period equals the increase in net worth (or equity) for the same period on the Balance Sheet. Also, check that the year-to-date profit equals the year-to- date growth in net worth.Balance Sheet 2. The total hotel labor expense equals the sum of all of the departmental labor expense lines. Check that the same is true for salaries and wages and each benefit and payroll tax category. Continue ►

10. FINANCIAL MANAGEMENT GUIDE © Marin Management, Inc. 10 7200. Financial Reporting Guide, 7234 Income Statements E. Checking the Income Statement before Distribution (cont.) 3. The total house laundry department expense equals the total allocated to the rooms, food and other departments. The general manager should also check Income Statements for reasonableness and errors. If changes are made to prior period’s Income Statements, recheck all of the above. End

11. FINANCIAL MANAGEMENT GUIDE © Marin Management, Inc. 11 7200. Financial Reporting Guide, 7234 Income Statements