ACCOUNTING TERMS
1. Food Cost Calculation :
Opening Stock + Purchases – Closing
Stock
2. Individual Menu Item Cost (variable %):
Portion Cost/Priced Menu Item x 100
3. Food Cost Budget:
Food Cost/Sales Budget x 100
4. Setting the selling price:
Portion Cost/Food Cost target % x 100
5. Variance Report:
Highlights deviations from budget
6. Receivable Report:
Monies owed by customers/suppliers to
business
7. Merchant Summaries:
Monies the credit card companies
(merchant cards) we the business for a
given period
8. Source document:
Record of occurrence of any business
transaction
e.g.
Purchase
orders,
Invoices,
Credit
notes,
Restaurant
Dockets, guest room accounts
9. Transaction reports:
Listing of all transactions within a general
ledger code or group of codes
10. Transaction Exemption Report:
Done by banks when an amount of 10k or
more is deposited by business – report
sent to Transaction Reports and Analysis
centre
11. Bank Reconciliation statement (BRS)
Reconciles the businesses cash and bank
balances to that of your bank
12. T Account:
Revenues on one side and expenses on
the other
13. Running Balance Account:
Daily tracking of invoices and sales – used
by small businesses
14. Double Entry Book Keeping:
Each transaction has two sides – Dr
(debit) and a Cr (credit) – E.g. Sale to a
customer on 30 days credit will be CrSales Revenue and Dr – Accounts
Receivable
15. Credit Card Statements:
Lists all transactions for a credit card
16. Account Summary/Balance:
Summary of a particular account e.g.
Bank, merchant etc
17. Invoice:
Docket/Payment details that are due to
be paid by business or to the business –
details?
18. Business Activity Statement (BAS):
Business GST (Goods and Services Tax) tax
collection summary and tax paid
summary – done monthly or quarterly.
Most businesses have GST computation
included
in
transactions
that
automatically calculate it.
19. PAYG:
Pay As You Go – tax the business is
expected to owe from the profits at end
of financial year.
20. Cashflow Report:
Cash movement report – in and out of
business/bank – critical part of business as
this determines actual cash available to
pay the obligations – updated weekly or
sometimes daily in businesses,
21. Sales Report:
Produced by each revenue earning
department within the business.
E.g.
Restaurant, Golf, Rooms etc – used to
compare actual to budget.
22. Stock Report:
Shows closing stock levels at end of
period. The intention is keep inventory as
low as possible using JIT/Par levels etc
23. Wastage Report:
Shows how much stock is wasted each
period e.g. wines, juices, food etc –
critical for business work in conjunction
with Stock Report – manage yield – 50ltr
Keg
24. Purchase Summary Report:
Summary of all purchases over a period –
helps procurement to set bulk purchasing
deals.
25. Labour /Wages report:
Labour or wages spent in each
department – salary vs. wages –
compared to budget and to industry
bench marks
26. Expenditure Reports:
Labour (On costs) and non labour
(administrative
expensesstationary,
selling expenses - advertising, finance
expenses- interest paid
27. Budget Reports:
Compares entire budget to actual MTD
and YTD and compared to MTDLY and
YTDLY
28. Supporting Reports:
Covers report (productivity, hour per
guest – benchmarking info)
Occupancy Rates: compared to last
year, compared to competition, Comp
Set
Unit Sold reports – product analysis –
identifies group sales such as cocktails,
beer and is used by management to
make strategic decisions.
27. Accrual Accounting:
Recognizes revenues when earned and
expenses when incurred to make these
revenues.
28. Cash Accounting:
Revenues are had when cash is received
and expenses when cash is paid
29. Forecasts
A periodical estimate of revenues for the
next period of accounting – realistic
based on economic climate, bookings
held etc – Revenue/Sales Strategy
Meetings
30. Indirect expenses:
Are expenses that are not directly
related to revenue producing
activities e.g. Administrative, General,
marketing, maintenance, energy
costs(undistributed operating
expense). Fixed Indirect expenses are
management fees, franchise fees,
guest entertainment etc.
Bank Reconciliations:
 To check that the bank general ledger code shows
the same as your business code
 Bank and business should have the same closing
balance
 Bank reconciliations are done monthly – large
businesses do it daily
 Each ledger code entry is checked – any
discrepancy is adjusted using a journal entry
 E.g. – Bank fees, direct deposits will not appear in
your general ledger.
 E.g. – cheques presented but not cleared will
appear in business general ledger but not in
bank(unpresented cheques)
 Cheques not presented will inflate your ledger cash
balance and your cheques may BOUNCE
Accounting Cycle
1. Transaction Analysis - A transaction occurs Source document created or checked
2. Journalise - Details of transaction entered in
journal
3. General Ledger - Journal entry is transferred to
General Ledger
4. Trial Balance (unadjusted) created - Closing
balance of (Dr or Cr) of each General Ledger is
recorded in Trial Balance
5. Work Sheet (Optional – see attachment)
6. Ledger accounts adjusted as necessary.
7. Closing Trial Balance prepared.
8. Financial Statements prepared – Income
Statement, Profit & Loss Statement, Balance Sheet
INCOME STATEMENT
 Departmentalised statement of revenues and
expenditures in hotel
 Varies from one establishment to another
 Has revenues on top of statement – e.g. Food
Revenue, Beverage, Room Hire, Other, Gaming,
Entertainment, management fees, franchise,
investment etc
 Revenues are reported when earned and not
received(accrual accounting)- Matching principle
of accounting - Owners Equity will increase if
revenues exceed expenses and will decrease
otherwise
 Expenses are reported at the bottom of the
income statement – R-E methodology applies i.e.
Food is purchased is recorded as asset; however
cost of sale for a food preparation is not
recognised until it has been determined how
much food inventory was sold
 Departmental Contributory Income is Income
before Tax – Departmental revenues less
 Departmental managers control their
departments with total autonomy and
responsibility
 Typical questions an Income Statement answers
a) Sales in month – compared to budget,
LYMTD, Last Month,YTD, LYYTD
b) Cost of goods sold - Food, Beverage, Other
compared to budget – compared to industry
benchmarks
c) Profitability of department
d) What we can do to minimise costs, increase
profits, increase revenues without incremental
costs?
e) – Profit or Cost centre – incentivised.
f) Productivity and wage cost % - compared to
budget, industry benchmarks?
g) How did we go compared to forecasts
 Each department manager critiques their
department.
 Employee costs are computed based on FTE
equivalent or other relevant method of referral.
 Net Food cost => cost of food after all
adjustments such as staff meals, entertainment
costs are taken off. Employee meal costs are
recoded to employee benefits as expense.
 Indirect expenses are expenses that are not
directly related to revenue producing activities.
Controllable costs but not directly controlled by




department managers(normally GM of property
– Note - wages for people responsible for
controlling these costs are part of this cost as
well)
Income before fixed charge is a critical line in
Income statement – measures overall efficiency.
Fixed charges relate to property taxes, insurance,
interest, depreciation etc.
Income tax is applied to this final income to
calculate Net Income of department.
Net Income is transferred to balance sheet as
Earnings.
COST OF SALES:
Cost of Sales = Opening Stock + Purchases –
Closing Stock
Perpetual
Inventory
Control
–
daily/continuous updating of receipt and sale of
each inventory item.
Cost of sales adjustments – interdepartmental
transfers, employee meals, promotional expense
Inventory Valuation Methods
1. Specific Item Cost – individually costed
2. First In First Out – stock rotation
3. Last In, First Out – not good during
inflationary pressure periods as margins
will suffer.
4. Weighted Average
BALANCE SHEET
Assets:
 Current Assets – that can be converted into cash
in a short period, less than a year.
1. Cash on hand
2. Cash in Bank
3. Marketable securities – e.g. Bonds, Short term
investments, term deposits(foot note to
indicate present or market value)
4. Credit
Card
Receivables
(merchant
summary).
5. Accounts receivables – Bad Debts?
6. Inventories – predominantly Food, Beverage,
supplies in hotels.
7. Prepaid Expense –e.g. insurance, rates, taxes,
license fees
 Fixed Assets – long life, permanent in
nature, not intended to be sold
1.
Land,
Building,
Furniture
and
Equipment
2.
Accumulated Depreciation – due to
wear & tear, decline or increase in
value due to economic factors etc.
3.
China, Glassware, Silverware(still new
and in storage
 Other Assets: which does not fit into either fixed or
current assets
1. Deposits – refundable in the future – e.g.
public utility company deposit
2. Investments – Long term
3.
Leasehold
Costs
or
Leasehold
Improvements – leased land – cost of this is
spread over the lease period or in other words
AMORTIZED.
Amortization applies to intangible assets such
as Goodwill or deferred expenses
4. Deferred Expenses - similar to prepaid
expense however long term e.g. prepaid
mortgage expense to claim additional
discount in long term cost – is normally
amortized(spread) over the life of mortgage.
LIABILITIES
 Current Liabilities – that must and can be paid in a
short period, less than a year.
1. Accounts Payable – Trade – suppliers
2. Accrued Expenses – Unpaid wages, Unpaid
salaries, payroll tax or similar costs
3. Income Tax Payable
4. Deposits and Credit balances – Unearned
Income – Prepaid deposits etc
5. Current Portion of long term mortgage(debts
due within a year)
6. Dividends Payable – if declared and unpaid
 Long Term Liabilities – that are due beyond one
after balance sheet date.
1.
2.
Stock Holders Equity – Owners interest in
enterprise – Capital Stock and Earnings
Capital Stock – Authorized number of sharesPar or Stated Value (par times number of
shares actually issued up to the authorised qty
is the value of Capital Stock). Other stock
types are preferred stock and common stock.
Common Stock - Units of ownership in a public
Company for which the holders can typically vote on matters
Pertaining to the company and receive dividends from the
Company’s growth. Common stockholders are the last to receive
Assets if the company liquidates.
Preferred Stock - stock whose holders are guaranteed priority
in the payment of dividends but whose holders have no voting rights
3.
Paid in Capital – Excess of Par- additional
monies received when stocks were sold more
than its par value
4. Retained Earnings – All net income or losses of
an incorporated business. Can be used to
offset dividends, extraordinary losses, prior
period adjustments or for capital growth of
company.
5. Proprietorship and partnership – Sole owner Vs
more than one owner.
6. Statement of Capital =
Beginning Capital + Net Income/Loss – Owners
Withdrawals = Ending Capital
 Balance Sheet Detail –
Representation varies and is dependant
1. on information desired,
2. Type of business – Partnership/Proprietorship or
Inc
3. Can be very simple and easy to read with
additional foot notes and addendums for
specific details.
4. It depicts the real picture of the business –
liquidity of business, earnings of owners,
breakdown of assets, business liabilities
5. Limitations are
a. True value of assets may not be real as the
figures were true when the transactions
were recorded. Does not show market
value
b. Goodwill built up is not reflected on
balance sheet.
c. Balance sheet does not show any value or
investment that business has spent on its
employees.
d. Some values are estimates or judgemental
figures e.g. depreciation and method used.
e. Balance sheet is the true value of business
at the time the figures for its making was
entered
COST/PROFIT CENTRES IN HOTEL
Outlet
Cost
Kitchen
Bar
Restaurant
Gaming
Spa
Marketing
Car
Parking
Front
Office
Human
Resources
Profit
Responsibility