Year Two Chapter 9
Standard Accounting Practices
Bellwork
You are investigating a possible
restaurant to purchase. What would
you like to know or be shown to help
you make that decision?
 Take five minutes to discuss with the
group at your table.
 Come up with very specific needs. Be
ready to report to the class your
answers.
9.1 Vocabulary

Accounting


Transaction


When money is exchanged for business reasons;
needs to be recorded in accounting records.
Loss


A system that helps businesses keep track of all
their financial information in an organized way.
When a business spends more money to pay its
costs than it receives in revenue.
Profit

The money left when costs have been subtracted
from revenue.
What is the cost of sales and
how is it figured? (page 382)
Cost is the price paid for goods or
services when the goods are received
or the services are provided.
 Direct cost is an expense that is the
responsibility of a specific department.
 Indirect costs are expenses that are
not easily charged to any one specific
department.

Think about this
If you share an apartment with a
roommate, but you only make 10% of
the long-distance phone calls, you
should pay only 10% of the longdistance phone bill. You benefit from
having the long-distance service but
your usage is much less than your
roommate’s. You should pay your fair
share, but it may not be 50%.
Follow Through
Alexander’s Restaurant began December
with $4,765 worth of products in its
food inventory, ended the month with
$2,690 worth of products in inventory,
and had receipts showing a total of
$4,950 in purchases. Determine the
operation’s cost of sales for December.
Bonus question: What is the opening
inventory for January?
Answer:

$4,765 + $4950 - $2,690 = $7,025

Bonus: $2,690
Group discussion

Define direct and indirect costs.
(pg382-3)
How are these costs distributed in a
large scale operation?
 Be prepared to identify your answer.

Calculate-Revenue and Costs

Louie’s Rib Barn started the month with
$12,500 worth of food in its food
inventory. At the end of the month
they purchased $36,800 in food.
Louie’s total costs for the entire year
were $635,500. In addition to its
dining room revenue, they also have
delivery and banquet revenues.
Figure Louie’s monthly
Cost of Sales
Starting Inventory-$12,500
 Ending Inventory-$10,200
 Food purchases-$36,800

Louie’s Yearly Revenue
Department Revenue Percentage
Dining room
$445,020
Delivery
230,000
Banquet
276,900
Total
Calculate each of the three department’s
Percentage of total revenue ( Divide the
total revenue into the department total)
Louie’s Yearly Revenue Answer
Department Revenue Percentage
Dining room
$445,020
47%
Delivery
230,000
24%
Banquet
276,900
29%
Total
$951,920
100%
Did Louie’s Rib Barn experience a
profit or loss?
Yearly Revenue $951,920
 Yearly food cost $635,500

What was the profit or loss?

$316,420 profit
9.2 Vocabulary

T-account (Double-Entry Account)

An accounting method which resembles a
capital T that uses debits on the left and
credits on the right.
Account Name
Debits Credits
9.2 Vocabulary, cont.

Credit


Amount entered on the right side of a
double-entry account (T-account)
Debit

Amount entered on the left side of a
double-entry account (T-account)
Example:

A manager buys an oven for $8,500
cash. The transaction will be recorded
as follows:
Cash
Debits Credits
$8,500
Equipment
Debits Credits
$8,500
Do these T-accounts on your
own!
Enter the appropriate debits and credits for
the following transactions in the Taccounts shown: (see page 391)
a. Purchased supplies worth $1,800 on credit.
b. Paid $800 cash for advertising.
c. Paid $1,800 cash on transaction a.
d. Paid $4,000 for wages.
e. Collected $15,800 in revenue.
f. Purchased a new soda fountain for $1,000
cash, $3,500 credit.
T’s = Cash, Accounts Payable, Wages, Supplies,
Revenues, Advertising, Equipment
9.3 Vocabulary

Income Statement


Shows a business’s revenue and expenses
over a period of time, as well as the
resulting profit or loss.
Net Income

Final profit or loss of the business for a
given period of time; found at the bottom
of the income statement for that period.
Did you know?

When someone wants to know the
bottom line, what they’re referring to is
net income, which is found at the
bottom of the income statement. Net
income gives a quick snapshot of how
well or how poorly a business is
performing.
The Chef’s Delight
Quarterly Income Statement for The
Chef’s Delight
TOTAL REVENUE
$57,000
EXPENSES
Cost of Goods sold $29,000
Supplies expense
1,250
Wages
6,500
Advertising
400
TOTAL EXPENSES
$
NET INCOME
$
Chef’s Delight Income Statement
Answer Key
Chef’s Delight
TOTAL REVENUE
$57,000
EXPENSES
Cost of Goods sold $29,000
Supplies expense
1,250
Wages
6,500
Advertising
400
TOTAL EXPENSES
$ 37,150
NET INCOME
$ 19,850
9.4 Vocabulary

Asset

An item of value that is owned by a business.

Paper asset - cash and credit extended to customers.

Physical assets - things such as buildings, equipment,

Current assets - those that can be converted to cash within

Fixed assets or capital items - items that have a life
furniture, accessories, and supplies.
one year.
expectancy of at least three years, such as land, buildings,
furniture, fixtures, and kitchen equipment.
BALANCE SHEET

A basic financial report that provides
information about what a business
owns and owes at a particular date.
(See page 400)
Assets = Liabilities + Owner’s equity
9.4 Vocabulary, cont.

Depreciation


Method of recording an asset’s gradual decrease
in value over its lifetime.
Liabilities


Debts owed by a business.
Current liabilities


Must be paid in one year. (Accounts payables, Food
supplies, advertising, etc)
Long-term liabilities

Must be paid beyond one year after the balance sheet
date. (Mortgage or rent, bonds, van loan, etc.)
On your paper, identify the following:
Asset(A) or Liability(L)
Short-term(ST) or Long-term(LT) or N/A
1.
2.
3.
4.
5.
6.
7.
8.
A or L
Accounts payable
___
Stocks in a company ___
Tables and chairs
___
Food Inventory Items___
Tableclothes
___
Unpaid salaries
___
Profits
___
Cash on hand
___
ST or LT
___
___
___
___
___
___
___
___
Owner’s Equity

Owner’s equity = Total assets – Total
liabilities

It tells the worth of the business.
ANSWER FOR BELLWORK:
You would want to see the owner’s
equity.
 You would want to see the income
statement.
 You would want to see the balance
sheet.
