Hotel Financial Statements - PowerPoint

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					Hotel Financial
Statements
Agenda
   Balance sheet and income statement
     Balance sheet for an overall operation
     Income statements for each of the operating
      departments (divisions)
 Direct vs indirect costs
 Undistributed operating expenses
 Cost of sales – value of inventory
 Responsibility accounting
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
Summary Operating Statement
Nature of Operations
                        Hotel

   Revenue Centers               Support Centers
    Rooms                        Administrative and General
    Food and Beverage            Data Processing
    Telephone                    Human Resources
    Gift Shop                    Maintenance
    Rentals and Other            Marketind and Sales


Departmental Income Statements        Expense Schedules
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 Statements

   Includes revenues and expenses of that
    department only (direct expenses)
               Revenues
               -Allowances
               =Net Revenue
    General
    Format     -Cost of Sales
               =Gross Profit
               -Payroll and Related Expenses
               -Other Direct Expense
               =Departmental Income
                (Contributory Income)
 Hotel Income Statement
Rooms Dept. I+S       Food Dept. I+S    Beverage Dept. I+S


                  Total Departmental Income
                                              Support
   - Undistributed Operating Expenses         Centers

   = Income before Fixed Charges
                                        Ownership
                  - Fixed Charges
                                        Expenses

     = Income before Taxes –Taxes = Net Income
Major Categories of Hotel I+S
   Operated Departments
       Rooms                          Revenue
       Food and Beverage              Centers
       Minor Operated Departments
   Undistributed Operating Expense
       Administrative and General
       Data Processing                          Support
       Human Resources                          Centers
       Marketing
       Property Operation and Maintenance
       Energy Costs
   Fixed Charges                                    Ownership
       Rent, Property Taxes, Property Insurance      Related
       Interest Expense                             Expenses
       Depreciaiton and Amortization
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. 2.2
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
Food
Department
Income
Statement
Pr. 2.1
Use of Departmental 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
   Questions answered
Example:
Hotel Income
Statement –
Summary
Form
Examples

 Exhibit 2.1 – Sample Departmental
  Income Statement – Food Department
 Exhibit 2.2 – Sample Summary Income
  Statement – Hotel
 Exhibit 2.3 – Alternative Summary Income
  Statement – Hotel
     DepartmentalIncome Statement and Cost
     Schedule main headings are included
Alternative Summary Statement
Inventory Valuation – Cost of Sales

   Different inventory valuation methods
     Specific   item cost
     First-in-first-out
     Last-in-first-out
     Weighted average cost
Specific Item Cost
First-in First-Out
Last-in First-Out
Weighed Average Cost




               Do Problem 2.4
Issue: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.
Restaurant Income Statement-
Allocation of Indirect Expenses
Revenue Mix Effect –
Shift of $16,000 revenue from banquet to dining room.
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 - 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
   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
 Capital Stock
 Capital Surplus – Paid-in-Capital in
  Excess of Par Value
 Retained Earnings



         Review Exhibit 2.7, 2.8 and 2.9
                Do Problem 2.7
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

				
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