Income Statement
 Statement
of Earnings
 Profit and Loss Statement
 Statement of Operations
 Frequency - Daily, Weekly,
Monthly, Quarterly, Annually
Income Statement
 Reports
on a Period of Time
 Departmental Income Statements
 Uniform System of Accounts
Questions Answered
 How
Profitable Was Business?
 What Were the Total Sales?
 How Much Was the Labor Cost?
 What Was Food Cost Percent?
Questions Answered
 Are
Sales In(de)creasing?
 Are Expenses In(de)creasing?
 What Were Marketing Costs?
 What Percent of Sales Is Profit?
Elements of Income Statement
 Revenue
- Sale of Goods and
Services; Investment Income;
Rental Income
 Expenses - Outflows to Produce
Goods; Cost of Goods Sold;
Labor; Controllable Expenses;
Noncontrollable Expenses
Elements of Income Statement
 Other
Gains and Losses - From
Incidental Transactions; Acts of
Nature
 Period Income or Loss Add/Deduct To/From Equity
Elements of Income Statement
 Internal
Users - Management
 External Users - Summary
Statement
Uniform System of Accounts
 Standardized
Accounting
System
 Industry Driven
 Basic Formats
 Departmental Statement and
Schedules
Uniform System of Accounts
 Explanations
and Discussions
 Allows Comparison - Other
Operations and Self
 Can Be Used by Any Size
Operation
Uniform System of Accounts
 Property
Level Designed Use
 Direct Operating Expense Based
on Cost of Goods Sold, Direct
Labor Expense, Direct Expenses
Contents of the Income Statement
 Operated
Departments
 Net Revenues by Department
 Cost of Sales
 Payroll and Related
See page 95 for sample
Contents of the Income Statement
 Other
Direct Expenses
 Departmental Income –
Net Department Revenues
Less Departmental Expenses
Contents of the Income Statement
 Non
Operated Departments
 Undistributed Operating
Expenses
 Payroll and Related and Other
Are Shown Separately
Contents of the Income Statement
 Administrative
and General
 Data Processing
 Human Resources
 Transportation
Contents of the Income Statement
 Marketing
 Property
Operations and
Maintenance
 Energy Costs
 Income After Undistributed
Operating Expenses
Contents of the Income Statement
 Other
Expenses (Board
Decisions)
 Management Fees
 Fixed Charges (Capacity Costs)
 Other Gains or Losses
 Sale of Property/Equipment
Income Statement Analysis
 Comparative
Statements
 Horizontal Analysis
– Calculate Absolute Change (Dollar Difference)
– Calculate Relative Change (Percentage Difference)
 Investigate
Significant Differences
 Internal Analysis
Horizontal Analysis Example
A
2000
B
1999
Formula
Total Revenue
C
$
(A-B)
%
C/B
1,632,500
1,250,325
382,175
30.57%
Rooms
Revenue
Payroll and Related Costs
Other Direct Expenses
Room Dept Income
925,000
225,000
60,000
640,000
750,000
145,000
62,500
542,500
175,000
80,000
-2,500
97,500
23.33%
55.17%
-4.00%
17.97%
Food and Beverage
Revenue
Cost of Sales
Payroll and Related Costs
Other Direct Expesnes
Food & Bev Dept Income
585,000
197,000
215,000
45,000
128,000
400,000
132,000
185,000
43,400
39,600
185,000
65,000
30,000
1,600
88,400
46.25%
49.24%
16.22%
3.69%
223.23%
Income Statement Analysis
 Common
Size Statements
 Vertical Analysis
 Total Revenue Equal 100%
 Each Expense Shown As
Percentage of Total
 Compare to Industry, Like
Businesses or Self
Vertical Analysis Example
2000
1999
2000%
1,632,500
1,250,325
100.00% 100.00%
Rooms
Revenue
Payroll and Related Costs
Other Direct Expenses
Room Dept Income
925,000
225,000
60,000
640,000
750,000
145,000
62,500
542,500
56.66%
13.78%
3.68%
39.20%
59.98%
11.60%
5.00%
43.39%
Food and Beverage
Revenue
Cost of Sales
Payroll and Related Costs
Other Direct Expesnes
585,000
197,000
215,000
45,000
400,000
132,000
185,000
43,400
35.83%
12.07%
13.17%
2.76%
31.99%
10.56%
14.80%
3.47%
Total Revenue
1999%
Data Availability
 PKF
Consulting - Trends in the
Hotel Industry (U.S. and
Worldwide)
 PKF Consulting - Clubs in Town
and Country
Data Availability
 Arthur
Andersen & Smith Travel
Research - The Host Report Hotel Operating Statistics
 NRA - Restaurant Industry
Operations Report
 Local Hotel Organizations
Cost of Goods Sold Calc
Beginning Inventory
+ Purchases
= Goods Avail For Sale
- Ending Inventory
= Cost of Goods Consumed
- Transfer Out
- Employee meals
+ Transfer In
= Cost of Goods Sold
Adjustments
Intraunit transfers
 Interunit transfers
 Grease sales
 Steward sales
 Gratis to bars

Adjustments
Promotion expenses
 Employee meals
 To General Manager
 “Comps”

Cost of Goods Sold Example
 Assume:
–Beginning Inv $10,000
–Purchases $50,000
–Ending Inv $25,000
–Room Div Emp Meal $15,000
–Transfer From Bar
$1,000
–Transfer to Banquets $1,500
Cost of Goods Sold Example
$10,000 Beginning Inv
$50,000 Purchases
$60,000 Goods Avail Sale
($25,000) Ending Inv
$35,000 Cost of Goods Consumed
($15,000) Room Div Emp Meal
$1,000 Transfer From Bar
($1,500) Transfer to Banquets
$19,500 Cost of Goods Sold
Cost of Food or Beverages Sold
 Food
or beverage cost percent
equals cost of goods sold divided
by food or beverage sales
 What
is reported to management?
Gain or Loss Calc
Original Cost
- Accumulated Depreciation
= Book Value
Sales Price
- Book Value
= Gain if positive
= Loss if negative
Gain or Loss Example
 Assume
Purchased Truck for $10,000
Accumulated Depr is $6,000
Sold Truck For $5,000
Gain or Loss Example
$10,000 Purchase Price
(6,000) Accum Depr
4,000 Book Value
$5,000 Sales Price
(4,000) Book Value
1,000 Gain (Since positive)
Key Items To Remember
Revenues are listed Net of Allowances
 Cost of employee meals are part of
that dept’s expenses not cost of food
sold
 Taxes and Benefits considered as part
of payroll expense
 See page 90 for the 14 Rooms Division
Major Other Expenses

Key Items To Remember
 See
pages 90 - 92 regarding
–Administrative
–Security
–Marketing
–Transportation
–Property