Table of Contents-Hospitality
Chapter 1 - Introduction to Hospitality Accounting .....................................................Error! Bookmark not defined.
Characteristics of the Hospitality Industry .................................................................. Error! Bookmark not defined.
Hotel Organizational Structure ................................................................................... Error! Bookmark not defined.
The Controller Job Description .................................................................................... Error! Bookmark not defined.
Decisions Requiring Accounting Information .............................................................. Error! Bookmark not defined.
Financial and Managerial Accounting ........................................................................ Error! Bookmark not defined.
The Structure of this Book ........................................................................................... Error! Bookmark not defined.
Chapter 2 - The System of Accounting ........................................................................Error! Bookmark not defined.
Financial Accounting Basics ........................................................................................ Error! Bookmark not defined.
Accounting Frameworks ............................................................................................. Error! Bookmark not defined.
Accounting Principles .................................................................................................. Error! Bookmark not defined.
The Accounting Cycle .................................................................................................. Error! Bookmark not defined.
Accounting Transactions............................................................................................. Error! Bookmark not defined.
Types of Transaction Cycles ........................................................................................ Error! Bookmark not defined.
Source Documents ...................................................................................................... Error! Bookmark not defined.
Double Entry Accounting ............................................................................................ Error! Bookmark not defined.
The Accounting Equation ............................................................................................ Error! Bookmark not defined.
Journal Entries ............................................................................................................ Error! Bookmark not defined.
The Accruals Concept .................................................................................................. Error! Bookmark not defined.
The Chart of Accounts ................................................................................................. Error! Bookmark not defined.
Major Journal Entries .................................................................................................. Error! Bookmark not defined.
The Ledger Concept .................................................................................................... Error! Bookmark not defined.
Posting to the General Ledger ................................................................................ Error! Bookmark not defined.
General Ledger Overview ....................................................................................... Error! Bookmark not defined.
The Trial Balance ........................................................................................................ Error! Bookmark not defined.
The Trial Balance Format ........................................................................................ Error! Bookmark not defined.
The Extended Trial Balance .................................................................................... Error! Bookmark not defined.
The Realization Concept ............................................................................................. Error! Bookmark not defined.
Accrual Basis of Accounting ........................................................................................ Error! Bookmark not defined.
Cash Basis of Accounting ............................................................................................ Error! Bookmark not defined.
Converting Cash Basis to Accrual Basis Accounting .................................................... Error! Bookmark not defined.
Chapter 3 - The Financial Statements..........................................................................Error! Bookmark not defined.
Income Statement Overview ....................................................................................... Error! Bookmark not defined.
The Single-Step Income Statement ........................................................................ Error! Bookmark not defined.
The Multi-Step Income Statement ......................................................................... Error! Bookmark not defined.
The Multi-Period Income Statement ...................................................................... Error! Bookmark not defined.
Hospitality Income Statement Format ................................................................... Error! Bookmark not defined.
The Balance Sheet....................................................................................................... Error! Bookmark not defined.
The Common Size Balance Sheet ............................................................................ Error! Bookmark not defined.
The Comparative Balance Sheet ............................................................................. Error! Bookmark not defined.
The Statement of Cash Flows ...................................................................................... Error! Bookmark not defined.
The Direct Method.................................................................................................. Error! Bookmark not defined.
The Indirect Method ............................................................................................... Error! Bookmark not defined.
Limitations of the Financial Statements ..................................................................... Error! Bookmark not defined.
Chapter 4 - Receivables and Payables Accounting.......................................................Error! Bookmark not defined.
Accounting for Accounts Receivable ........................................................................... Error! Bookmark not defined.
Accounting for Deposits .............................................................................................. Error! Bookmark not defined.
Accounting for Cash Sales ........................................................................................... Error! Bookmark not defined.
Remitting Sales Taxes ................................................................................................. Error! Bookmark not defined.
The Accounts Receivable Aging Report ....................................................................... Error! Bookmark not defined.
Calculating and Recording Bad Debts ......................................................................... Error! Bookmark not defined.
Direct Write-Off Method ........................................................................................ Error! Bookmark not defined.
Allowance for Doubtful Accounts ........................................................................... Error! Bookmark not defined.
Accounting for Accounts Payable ............................................................................... Error! Bookmark not defined.
Accounting for Petty Cash........................................................................................... Error! Bookmark not defined.
Petty Cash Transfer Form ....................................................................................... Error! Bookmark not defined.
Petty Cash Voucher................................................................................................. Error! Bookmark not defined.
Petty Cash Book ...................................................................................................... Error! Bookmark not defined.
The 1099 Vendor ......................................................................................................... Error! Bookmark not defined.
Chapter 5 - Payroll Accounting ....................................................................................Error! Bookmark not defined.
Employee Time Tracking ............................................................................................. Error! Bookmark not defined.
Gross Pay Calculations ................................................................................................ Error! Bookmark not defined.
Hourly Rate Plan ..................................................................................................... Error! Bookmark not defined.
Overtime ................................................................................................................. Error! Bookmark not defined.
Tips.......................................................................................................................... Error! Bookmark not defined.
Types of Payroll Taxes ................................................................................................. Error! Bookmark not defined.
Social Security Tax .................................................................................................. Error! Bookmark not defined.
Medicare Tax .......................................................................................................... Error! Bookmark not defined.
Unemployment Taxes ............................................................................................. Error! Bookmark not defined.
Income Tax Withholdings ........................................................................................... Error! Bookmark not defined.
Benefits and Other Deductions ................................................................................... Error! Bookmark not defined.
Net Pay ....................................................................................................................... Error! Bookmark not defined.
Remitting Payroll Taxes .............................................................................................. Error! Bookmark not defined.
Types of Tax Deposit Schedules .............................................................................. Error! Bookmark not defined.
Monthly Deposit Schedule...................................................................................... Error! Bookmark not defined.
Semiweekly Deposit Schedule ................................................................................ Error! Bookmark not defined.
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Federal Unemployment Deposit Schedule ............................................................. Error! Bookmark not defined.
Remittance Method ................................................................................................ Error! Bookmark not defined.
The Form 941 Quarterly Federal Tax Return .......................................................... Error! Bookmark not defined.
State Tax Remittances ............................................................................................ Error! Bookmark not defined.
Payments to Employees .............................................................................................. Error! Bookmark not defined.
The Payroll Register .................................................................................................... Error! Bookmark not defined.
Form W-2 .................................................................................................................... Error! Bookmark not defined.
Payroll Journal Entries ................................................................................................ Error! Bookmark not defined.
Types of Payroll Journal Entries .............................................................................. Error! Bookmark not defined.
Primary Payroll Journal Entry ................................................................................. Error! Bookmark not defined.
Accrued Wages ....................................................................................................... Error! Bookmark not defined.
Manual Paycheck Entry .......................................................................................... Error! Bookmark not defined.
Employee Advances ................................................................................................ Error! Bookmark not defined.
Accrued Vacation Pay ............................................................................................. Error! Bookmark not defined.
Tax Deposits ............................................................................................................ Error! Bookmark not defined.
Chapter 6 - Inventory Accounting ...............................................................................Error! Bookmark not defined.
The Periodic Inventory System .................................................................................... Error! Bookmark not defined.
The Perpetual Inventory System ................................................................................. Error! Bookmark not defined.
The Physical Inventory Count ...................................................................................... Error! Bookmark not defined.
Inventory Cost Layering Overview .............................................................................. Error! Bookmark not defined.
The First in, First Out Method ..................................................................................... Error! Bookmark not defined.
The Last in, First Out Method ..................................................................................... Error! Bookmark not defined.
The Weighted Average Method .................................................................................. Error! Bookmark not defined.
Estimating Ending Inventory ....................................................................................... Error! Bookmark not defined.
Gross Profit Method ............................................................................................... Error! Bookmark not defined.
Retail Inventory Method......................................................................................... Error! Bookmark not defined.
Cost of Food Consumed .............................................................................................. Error! Bookmark not defined.
Cost of Sales Account Classifications .......................................................................... Error! Bookmark not defined.
Chapter 7 - Fixed Asset Accounting .............................................................................Error! Bookmark not defined.
What are Fixed Assets? ............................................................................................... Error! Bookmark not defined.
Fixed Asset Classifications........................................................................................... Error! Bookmark not defined.
Accounting for Fixed Assets ........................................................................................ Error! Bookmark not defined.
The Capitalization Limit .............................................................................................. Error! Bookmark not defined.
The Base Unit .............................................................................................................. Error! Bookmark not defined.
The Initial Measurement of a Fixed Asset ................................................................... Error! Bookmark not defined.
The Purpose of Depreciation ....................................................................................... Error! Bookmark not defined.
Depreciation Concepts ................................................................................................ Error! Bookmark not defined.
Accelerated Depreciation............................................................................................ Error! Bookmark not defined.
Sum-of-the-Years’ Digits Method ........................................................................... Error! Bookmark not defined.
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Double-Declining Balance Method ......................................................................... Error! Bookmark not defined.
Straight-Line Method .................................................................................................. Error! Bookmark not defined.
Units of Activity Method ............................................................................................. Error! Bookmark not defined.
MACRS Depreciation ................................................................................................... Error! Bookmark not defined.
The Depreciation of Land ............................................................................................ Error! Bookmark not defined.
The Depreciation of Land Improvements .................................................................... Error! Bookmark not defined.
Depreciation Accounting Entries ................................................................................. Error! Bookmark not defined.
Accumulated Depreciation.......................................................................................... Error! Bookmark not defined.
Asset Derecognition .................................................................................................... Error! Bookmark not defined.
Abandoned Assets ...................................................................................................... Error! Bookmark not defined.
Asset Disposal Accounting .......................................................................................... Error! Bookmark not defined.
Chapter 8 - Interest Capitalization ..............................................................................Error! Bookmark not defined.
Overview of Capitalized Interest ................................................................................. Error! Bookmark not defined.
When to Capitalize Interest ........................................................................................ Error! Bookmark not defined.
The Interest Capitalization Period ............................................................................... Error! Bookmark not defined.
The Capitalization Rate ............................................................................................... Error! Bookmark not defined.
Calculating Interest Capitalization .............................................................................. Error! Bookmark not defined.
Chapter 9 - Debt Accounting .......................................................................................Error! Bookmark not defined.
Basic Debt Accounting ................................................................................................ Error! Bookmark not defined.
The Amortization Schedule ......................................................................................... Error! Bookmark not defined.
Reconciling the Debt Account ..................................................................................... Error! Bookmark not defined.
Chapter 10 - Income Taxes ..........................................................................................Error! Bookmark not defined.
Sole Proprietorship Taxes............................................................................................ Error! Bookmark not defined.
Partnership Taxes ....................................................................................................... Error! Bookmark not defined.
C Corporation Taxes .................................................................................................... Error! Bookmark not defined.
S Corporation Taxes .................................................................................................... Error! Bookmark not defined.
Tax Reduction Strategies for Small Businesses ........................................................... Error! Bookmark not defined.
Chapter 11 - Other Accounting Topics .........................................................................Error! Bookmark not defined.
Startup Costs ............................................................................................................... Error! Bookmark not defined.
Advertising Costs ........................................................................................................ Error! Bookmark not defined.
Gift Cards .................................................................................................................... Error! Bookmark not defined.
Chapter 12 - Controls ..................................................................................................Error! Bookmark not defined.
The Proper Balance of Control Systems ...................................................................... Error! Bookmark not defined.
The Nature of Risk....................................................................................................... Error! Bookmark not defined.
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Control Principles ........................................................................................................ Error! Bookmark not defined.
The Failings of Internal Controls ................................................................................. Error! Bookmark not defined.
Preventive and Detective Controls .............................................................................. Error! Bookmark not defined.
Manual and Automated Controls ............................................................................... Error! Bookmark not defined.
Constructing a System of Controls .............................................................................. Error! Bookmark not defined.
Common Fraud Risk Factors ....................................................................................... Error! Bookmark not defined.
Hospitality Industry Risk Characteristics ..................................................................... Error! Bookmark not defined.
Hospitality Industry Fraud .......................................................................................... Error! Bookmark not defined.
Specific Controls .......................................................................................................... Error! Bookmark not defined.
Controls for the Small Organization ........................................................................... Error! Bookmark not defined.
Chapter 13 - Pricing Methodologies ............................................................................Error! Bookmark not defined.
Price Elasticity of Demand .......................................................................................... Error! Bookmark not defined.
Cross Price Elasticity of Demand ................................................................................. Error! Bookmark not defined.
Pricing Perception ....................................................................................................... Error! Bookmark not defined.
Market-Based Pricing ................................................................................................. Error! Bookmark not defined.
Dynamic Pricing .......................................................................................................... Error! Bookmark not defined.
Pricing Segmentation .................................................................................................. Error! Bookmark not defined.
Cost Markup Pricing (Meals) ...................................................................................... Error! Bookmark not defined.
Investment-Based Pricing (Room Rates) ..................................................................... Error! Bookmark not defined.
Hubbart Formula (Room Rates) .................................................................................. Error! Bookmark not defined.
Hubbart Formula (Meal Pricing) ................................................................................. Error! Bookmark not defined.
Menu Engineering....................................................................................................... Error! Bookmark not defined.
Contribution by Meal Period ....................................................................................... Error! Bookmark not defined.
Discounting of Room Rates ......................................................................................... Error! Bookmark not defined.
Room Revenue Yield Analysis ..................................................................................... Error! Bookmark not defined.
Price Increase Considerations ..................................................................................... Error! Bookmark not defined.
Non-Profit Pricing ....................................................................................................... Error! Bookmark not defined.
Chapter 14 - Ratio and Trend Analysis ........................................................................Error! Bookmark not defined.
Interpretation of Financial Statements ....................................................................... Error! Bookmark not defined.
Horizontal Analysis ..................................................................................................... Error! Bookmark not defined.
Vertical Analysis .......................................................................................................... Error! Bookmark not defined.
Current Ratio............................................................................................................... Error! Bookmark not defined.
Quick Ratio.................................................................................................................. Error! Bookmark not defined.
Accounts Payable Turnover Ratio ............................................................................... Error! Bookmark not defined.
Accounts Receivable Turnover Ratio ........................................................................... Error! Bookmark not defined.
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Inventory Turnover Ratio ............................................................................................ Error! Bookmark not defined.
Fixed Asset Turnover Ratio ......................................................................................... Error! Bookmark not defined.
Sales to Working Capital Ratio ................................................................................... Error! Bookmark not defined.
Debt to Equity Ratio .................................................................................................... Error! Bookmark not defined.
Fixed Charge Coverage ............................................................................................... Error! Bookmark not defined.
Net Profit Ratio ........................................................................................................... Error! Bookmark not defined.
Return on Net Assets .................................................................................................. Error! Bookmark not defined.
Hotel Operating Ratios ............................................................................................... Error! Bookmark not defined.
Paid Occupancy Percentage ................................................................................... Error! Bookmark not defined.
Complimentary Occupancy Percentage ................................................................. Error! Bookmark not defined.
Average Occupancy per Room................................................................................ Error! Bookmark not defined.
Average Room Rate ................................................................................................ Error! Bookmark not defined.
Revenue per Available Room .................................................................................. Error! Bookmark not defined.
Revenue per Available Customer ........................................................................... Error! Bookmark not defined.
Hotel Market Share ................................................................................................ Error! Bookmark not defined.
Restaurant Operating Ratios ...................................................................................... Error! Bookmark not defined.
Seat Turnover ......................................................................................................... Error! Bookmark not defined.
Average Food Service Check ................................................................................... Error! Bookmark not defined.
Ratio of Beverage to Food Revenue ....................................................................... Error! Bookmark not defined.
Limitations of Ratio Analysis ....................................................................................... Error! Bookmark not defined.
Chapter 15 - Cost Concepts .........................................................................................Error! Bookmark not defined.
The Economics of Cost Management.......................................................................... Error! Bookmark not defined.
What is Cost? .............................................................................................................. Error! Bookmark not defined.
Basic Cost Types .......................................................................................................... Error! Bookmark not defined.
Fixed Costs .............................................................................................................. Error! Bookmark not defined.
Variable Costs ......................................................................................................... Error! Bookmark not defined.
Mixed Costs ............................................................................................................ Error! Bookmark not defined.
Step Costs ............................................................................................................... Error! Bookmark not defined.
Differential Costs .................................................................................................... Error! Bookmark not defined.
Discretionary Costs ................................................................................................. Error! Bookmark not defined.
Committed Costs .................................................................................................... Error! Bookmark not defined.
Sunk Costs ............................................................................................................... Error! Bookmark not defined.
The Cost Allocation Conundrum ................................................................................. Error! Bookmark not defined.
Advantages of Cost Management .............................................................................. Error! Bookmark not defined.
Chapter 16 - Cost-Volume-Profit Analysis ...................................................................Error! Bookmark not defined.
Contribution Margin ................................................................................................... Error! Bookmark not defined.
Breakeven Point .......................................................................................................... Error! Bookmark not defined.
Margin of Safety ......................................................................................................... Error! Bookmark not defined.
Cost-Volume-Profit Analysis ....................................................................................... Error! Bookmark not defined.
Cost-Volume-Profit Cautions....................................................................................... Error! Bookmark not defined.
Sales Mix ..................................................................................................................... Error! Bookmark not defined.
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Chapter 17 - Operations Budgeting .............................................................................Error! Bookmark not defined.
The Advantages of Budgeting ..................................................................................... Error! Bookmark not defined.
The Disadvantages of Budgeting ................................................................................ Error! Bookmark not defined.
The Operations Budget ............................................................................................... Error! Bookmark not defined.
Revenue Projections ............................................................................................... Error! Bookmark not defined.
Expense Projections ................................................................................................ Error! Bookmark not defined.
The Flexible Budget ..................................................................................................... Error! Bookmark not defined.
Formulation of the Budget.......................................................................................... Error! Bookmark not defined.
The Long-Range Budget .............................................................................................. Error! Bookmark not defined.
Variance Analysis ........................................................................................................ Error! Bookmark not defined.
Types of Variances .................................................................................................. Error! Bookmark not defined.
Selling Price Variance .............................................................................................. Error! Bookmark not defined.
Sales Volume Variance ........................................................................................... Error! Bookmark not defined.
Purchase Price Variance ......................................................................................... Error! Bookmark not defined.
Material Yield Variance ........................................................................................... Error! Bookmark not defined.
Labor Rate Variance ................................................................................................ Error! Bookmark not defined.
Operating without a Budget ....................................................................................... Error! Bookmark not defined.
Chapter 18 - Capital Budgeting ...................................................................................Error! Bookmark not defined.
Overview of Capital Budgeting ................................................................................... Error! Bookmark not defined.
Time Value of Money .................................................................................................. Error! Bookmark not defined.
Present and Future Value Tables ................................................................................ Error! Bookmark not defined.
Cost of Capital Derivation ........................................................................................... Error! Bookmark not defined.
Cost of Debt ............................................................................................................ Error! Bookmark not defined.
Cost of Preferred Stock ........................................................................................... Error! Bookmark not defined.
Cost of Common Stock ........................................................................................... Error! Bookmark not defined.
Weighted Average Cost of Capital .......................................................................... Error! Bookmark not defined.
Net Present Value Analysis ......................................................................................... Error! Bookmark not defined.
Terminal Value ............................................................................................................ Error! Bookmark not defined.
Internal Rate of Return ............................................................................................... Error! Bookmark not defined.
Incremental Internal Rate of Return ........................................................................... Error! Bookmark not defined.
Profitability Index ........................................................................................................ Error! Bookmark not defined.
Breakeven Analysis ..................................................................................................... Error! Bookmark not defined.
Payback Method ......................................................................................................... Error! Bookmark not defined.
Real Options................................................................................................................ Error! Bookmark not defined.
Capital Expenditure Proposal Analysis ........................................................................ Error! Bookmark not defined.
Information Recordation ............................................................................................ Error! Bookmark not defined.
Separate Spreadsheet ............................................................................................. Error! Bookmark not defined.
Separate General Ledger / Subledger Accounts ..................................................... Error! Bookmark not defined.
Separate Accounting Module ................................................................................. Error! Bookmark not defined.
Chapter 19 - The Lease or Buy Decision ......................................................................Error! Bookmark not defined.
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The Lease Arrangement .............................................................................................. Error! Bookmark not defined.
The Lease or Buy Decision ........................................................................................... Error! Bookmark not defined.
Leasing Concerns ........................................................................................................ Error! Bookmark not defined.
Leasing Advantages .................................................................................................... Error! Bookmark not defined.
Chapter 20 - Cash Management ..................................................................................Error! Bookmark not defined.
The Difference between Net Income and Cash Flow .................................................. Error! Bookmark not defined.
The Bank Reconciliation .............................................................................................. Error! Bookmark not defined.
The Daily Bank Reconciliation ..................................................................................... Error! Bookmark not defined.
The Cash Forecast ....................................................................................................... Error! Bookmark not defined.
The Short-Term Cash Forecast................................................................................ Error! Bookmark not defined.
The Medium-Term Cash Forecast ........................................................................... Error! Bookmark not defined.
The Need for Cash Concentration ............................................................................... Error! Bookmark not defined.
Cash Sweeping ............................................................................................................ Error! Bookmark not defined.
The Zero Balance Account ...................................................................................... Error! Bookmark not defined.
Multiple Sweep Arrangements ............................................................................... Error! Bookmark not defined.
Sweeping Rules ....................................................................................................... Error! Bookmark not defined.
Sweep Costs ............................................................................................................ Error! Bookmark not defined.
Notional Pooling ......................................................................................................... Error! Bookmark not defined.
Notional Pooling Problems ..................................................................................... Error! Bookmark not defined.
Notional Pooling Costs ............................................................................................ Error! Bookmark not defined.
Cash Concentration Best Practices ............................................................................. Error! Bookmark not defined.
Cash Concentration Alternatives ................................................................................ Error! Bookmark not defined.
Accounting for Cash Concentration Transactions ....................................................... Error! Bookmark not defined.
Investments ................................................................................................................ Error! Bookmark not defined.
Accounting for Investments - Dividends and Interest Income .................................... Error! Bookmark not defined.
Stock Dividends and Stock Splits ............................................................................ Error! Bookmark not defined.
Noncash Dividends ................................................................................................. Error! Bookmark not defined.
Chapter 21 - Working Capital Management ................................................................Error! Bookmark not defined.
The Cash Conversion Cycle .......................................................................................... Error! Bookmark not defined.
Accounts Receivable Enhancements ........................................................................... Error! Bookmark not defined.
Credit Enhancements ............................................................................................. Error! Bookmark not defined.
Billing Enhancements ............................................................................................. Error! Bookmark not defined.
Collection Enhancements ....................................................................................... Error! Bookmark not defined.
Accounts Receivable Policies .................................................................................. Error! Bookmark not defined.
Inventory Enhancements ............................................................................................ Error! Bookmark not defined.
Inventory Policies ................................................................................................... Error! Bookmark not defined.
Accounts Payable Enhancements ............................................................................... Error! Bookmark not defined.
Terms Renegotiation .............................................................................................. Error! Bookmark not defined.
Early Payment Discounts ........................................................................................ Error! Bookmark not defined.
Payment Processing Frequency .............................................................................. Error! Bookmark not defined.
Accounts Payable Policies ....................................................................................... Error! Bookmark not defined.
viii
Answers to Chapter Questions ............................................................................Error! Bookmark not defined.
Glossary ......................................................................................................................Error! Bookmark not defined.
Index...........................................................................................................................Error! Bookmark not defined.
EXAM………………………………………………………………………………………………………………327
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