The Balance Sheet

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HFT 3431
Chapter 2
The Balance Sheet
Questions Answered by
Balance Sheet
•
•
•
•
Amount of Cash on Hand?
What is the Total Debt?
What is Funding Mix?
How Much is Owed to the Hotel?
Questions Answered by
Balance Sheet
•
•
•
•
What are the Tax Liabilities?
Can Current Debt be Paid?
What is the Financial Strength?
How Much have Stockholders
Invested in the Assets?
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
• Property Level Designed Use
Balance Sheet Limitations
• Does Not Reflect Current Values
of Assets (Booked According to
Cost Principle)
• Does Not Include Some Things
of Value Such as Personnel,
Location, Customer Base,
Goodwill
Balance Sheet Limitations
• Becomes Quickly Outdated
(static, not dynamic)
• Some Account Balances are
Estimates Such as Depreciation
and Estimates for Uncollectibles
Balance Sheet - The
Statement of Financial
Position
• Assets = Liabilities + Equity
• Statement of Assets, Liabilities,
and Owners’ Equity at a Point in
Time
Balance Sheet - The
Statement of Financial
Position
• Assets
Current Assets
Noncurrent Receivables
Investments
Property and Equipment
Other Assets
Balance Sheet - The
Statement of Financial
Position
• Liabilities
Current Liabilities
Long Term Debt
Deferred Income Taxes
Commitments / Contingencies
Other Long-Term Liabilities
Balance Sheet - The
Statement of Financial
Position
• Owners’ Equity
Capital Stock
Additional Paid In Capital
Retained Earnings
Treasury Stock
Balance Sheet Formats and
Structure
• Account Format - Assets on Left
and Liabilities and Equity on
Right (page 46)
• Report Format - Assets First
Followed by Liabilities and
Equity (page 47)
Balance Sheet Formats and
Structure
• Current Assets - Converted to
Cash or Used in Operation in
One Year or Normal Operating
Cycle
• Listed in Order of Liquidity
Balance Sheet Formats and
Structure
•
•
•
•
•
Cash (All Forms)
Marketable Securities
Receivables
Inventories
Prepaid Expenses
Noncurrent Assets
• Noncurrent Receivables - not
expected to be collected within
one year - owners are shown
separate
• Investments - securities, land not
in use, and affiliate advances not
to be collected within one year
Noncurrent Assets
• Property and Equipment - Fixed
Assets, Capital Leases - Less
accumulated depreciation
• Smallwares - New USOA
Recommends to Expense or
Write off Over 3 Years
Noncurrent Assets
• Other Assets - Deferred Charges,
Security Deposits
• Preopening Expenses - New
USOA Recommends to Expense
in Current Period
Other Assets
• Goodwill
• Cash Surrender Value of Life
Insurance
• Deferred Charges
• Possibly Deferred Income Taxes
Balance Sheet Formats and
Structure
• Current Liabilities - Obligations
expected to be Satisfied in One
Year or Normal Operating Cycle
Current Liability
Presentation
• Payables
• Advance Deposits
• Current Maturities of Long Term
Debts
• Dividends Payable
• Income Taxes Payable
Long Term Liabilities
•
•
•
•
•
•
Obligations Beyond One Year
Notes Payable
Mortgages Payable
Bonds Payable
Capitalized Lease Obligations
Possibly Deferred Income Taxes
Owners’ Equity
•
•
•
•
•
•
Preferred Stock, Par @ $$$
Shares Authorized
Shares Issued
Common Stock, Par @ $$$
Shares Authorized
Shares Issued
Owners’ Equity
• Treasury Stock
• Additional Paid in Capital
• Retained Earnings
Owners’ Equity
• Sole Proprietorship Capital
• Partnership - Show Each
Owner’s Capital
• Withdrawal Accounts
Footnotes
•
•
•
•
Significant Accounting Policies
Accounts and Notes Receivable
Inventories
Investments
Footnotes
•
•
•
•
•
Property and Equipment
Current Liabilities
Long Term Debt
Capital Stock
Employee Benefit Plans
Footnotes
• Leases
• Segments of Business
• Supplemental Financial
Information
• Commitment/Contingent Liability
• Income Taxes
Balance Sheet Analysis
• Comparative Statements or Horizontal
Analysis
• Compute Absolute Change (dollar difference)
• Compute Relative Change (percentage difference)
• Investigate Significant Differences
• Internal Analysis
Assets
Current Assets
Cash
Marketable Securities (net)
Accounts Receivable
Inventories
Prepaid Expenses
Total Current Assets
Investments
Property Plant Equipment
Land
Buildings
Furniture & Equipment
Less Accum Depr
Smallwares
2000
A
1999
B
27,000
100,000
120,000
12,000
10,000
21,000
81,000
90,000
17,000
12,000
$
C
(A - B)
6,000
19,000
30,000
(5,000)
(2,000)
269,000
221,000
48,000
21.72%
40,000
35,000
5,000
14.29%
75,000
880,000
200,000
68,500
850,000
190,000
6,500
30,000
10,000
9.49%
3.53%
5.26%
46,500
(61,000)
-
4.19%
19.06%
0.00%
1,155,000 1,108,500
(381,000) (320,000)
20,500
20,500
%
D
(C / B)
28.57%
23.46%
33.33%
-29.41%
-16.67%
Balance Sheet Analysis
• Common Size Statements or Vertical
Analysis
• Total Assets Equal 100%
• Total Liabilities and Equity Equals 100%
• Each Individual Account is Shown as a
Percentage of the Total Assets
• Compare to Industry, Like Businesses
or Self
Assets
Current Assets
Cash
Marketable Securities (net)
Accounts Receivable
Inventories
Prepaid Expenses
Total Current Assets
Investments
Property Plant Equipment
Land
Buildings
Furniture & Equipment
Less Accum Depr
Smallwares
Total PPE
Total Assets (A)
2000
1999
2000%
1999%
27,000
100,000
120,000
12,000
10,000
21,000
81,000
90,000
17,000
12,000
2.45%
9.06%
10.87%
1.09%
0.91%
1.97%
7.61%
8.45%
1.60%
1.13%
269,000
221,000
24.38%
20.75%
40,000
35,000
3.62%
3.29%
75,000
880,000
200,000
68,500
850,000
190,000
6.80%
79.75%
18.12%
6.43%
79.81%
17.84%
104.67%
-34.53%
1.86%
104.08%
-30.05%
1.92%
72.00%
75.96%
100.00%
100.00%
1,155,000
(381,000)
20,500
1,108,500
(320,000)
20,500
794,500
809,000
1,103,500
1,065,000
Balance Sheet Analysis
• Base Year Comparisons
• Series of Years
• Compared to a Base Year
HOMEWORK
• PROBLEM 5
• USE THE NUMBERS IN
PROBLEM 13 TO PREPARE
COMMON SIZE & COMPARATIVE
BALANCE SHEETS – IGNORE
INSTRUCTIONS IN PROBLEM
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