The hospitality industry is subject to a unique mix of issues, including seasonal demand, high fixed costs, rapid inventory turnover, and labor-intensive processes. The accountant needs to operate an accounting system that is specially tailored to this environment. In Hospitality Accounting, instructor Steven M. Bragg describes the financial and managerial accounting aspects of a hospitality business, which includes hotels, restaurants, spas, and similar businesses.
The course familiarizes the accountant with basic concepts, addresses various types of financial statements, and describes the accounting needed to construct them. More detailed financial accounting topics include payroll, fixed assets, and payables. There are also many managerial accounting topics, such as the construction of a budget, price formulation systems, cost-volume-profit analysis, and cash management.
Upon successful completion of this course, participants will be able to:
- Cite the operating characteristics of the hospitality industry.
- State the intent of the accounting cycle.
- Cite key accounting principles.
- Cite the source of the information in the trial balance.
- Identify the different types, contents, and formats of the financial statements.
- Cite the different types of receivable and payable transactions.
- Identify the documents associated with the processing of receivables and payables.
- Cite the forms used in the payroll process.
- Identify the methods for calculating compensation and depositing tax remittances.
- Identify the types of inventory systems and cost layering methods.
- Cite the calculations used to estimate ending inventory.
- Identify the costs included in fixed assets, and the concepts used in the calculation of depreciation.
- Identify the types of projects for which interest should be capitalized.
- Identify when such capitalization should be terminated.
- Cite the items included in interest expense and the loan amortization table.
- Identify the tax reports associated with each type of business entity.
- Identify the costs considered to be startup costs.
- Cite the advantages of selling gift cards to customers.
- Define types of controls.
- Identify the controls that apply to each functional area of a business.
- Compare the types of pricing systems in use in the hospitality industry.
- Identify the impact of inelastic demand on price setting.
- Identify the flaws in the ratios used to analyze the hospitality industry.
- Identify the types of costs of cost management.
- Identify the benefits of cost management.
- Cite the calculations for contribution margin, breakeven, cost-volume-profit analysis, and sales mix variance.
- Identify the disadvantages of budgeting in general and flexible budgeting.
- Perform the calculation of the different types of variances.
- State the components of the cost of capital, and the types of analysis techniques used in capital budgeting.
- Cite the information used to derive a lease rate.
- Identify the conditions under which it makes the most sense to use different types of leases.
- Identify the advantages and disadvantages of a cash concentration system and a notional pooling system.
- Identify the content of the short-term and medium-term cash forecasts.
- Cite the composition of the cash conversion cycle.
- Identify ways to improve working capital cash flow.
Table of Contents
Chapter 1 – Introduction to Hospitality Accounting
Characteristics of the Hospitality Industry
Hotel Organizational Structure
The Controller Job Description
Decisions Requiring Accounting Information
Financial and Managerial Accounting
The Structure of this Book
Chapter 1 – Review Questions
Chapter 2 – The System of Accounting
Financial Accounting Basics
The Accounting Cycle
Types of Transaction Cycles
Double Entry Accounting
The Accounting Equation
The Accruals Concept
The Chart of Accounts
Major Journal Entries
The Ledger Concept
Posting to the General Ledger
General Ledger Overview
The Trial Balance
The Trial Balance Format
The Extended Trial Balance
The Realization Concept
Accrual Basis of Accounting
Cash Basis of Accounting
Converting Cash Basis to Accrual Basis Accounting
Chapter 2 – Review Questions
Chapter 3 – The Financial Statements
Income Statement Overview
The Single-Step Income Statement
The Multi-Step Income Statement
The Multi-Period Income Statement
Hospitality Income Statement Format
The Balance Sheet
The Common Size Balance Sheet
The Comparative Balance Sheet
The Statement of Cash Flows
The Direct Method
The Indirect Method
Limitations of the Financial Statements
Chapter 3 – Review Questions
Chapter 4 – Receivables and Payables Accounting
Accounting for Accounts Receivable
Accounting for Deposits
Accounting for Cash Sales
Remitting Sales Taxes
The Accounts Receivable Aging Report
Accounting for Bad Debts
Direct Write-Off Method
Allowance for Doubtful Accounts
Accounting for Accounts Payable
Accounting for Petty Cash
Petty Cash Transfer Form
Petty Cash Voucher
Petty Cash Book
The 1099 Vendor
Chapter 4 – Review Questions
Chapter 5 – Payroll Accounting
Employee Time Tracking
Gross Pay Calculations
Hourly Rate Plan
Types of Payroll Taxes
Social Security Tax
Income Tax Withholdings
Benefits and Other Deductions
Remitting Payroll Taxes
Types of Tax Deposit Schedules
Monthly Deposit Schedule
Semiweekly Deposit Schedule
Federal Unemployment Deposit Schedule
The Form 941 Quarterly Federal Tax Return
State Tax Remittances
Payments to Employees
The Payroll Register
Payroll Journal Entries
Types of Payroll Journal Entries
Primary Payroll Journal Entry
Manual Paycheck Entry
Accrued Vacation Pay
Chapter 5 – Review Questions
Chapter 6 – Inventory Accounting
The Periodic Inventory System
The Perpetual Inventory System
The Physical Inventory Count
Inventory Cost Layering Overview
The First in, First Out Method
The Last in, First Out Method
The Weighted Average Method
Estimating Ending Inventory
Gross Profit Method
Retail Inventory Method
Cost of Food Consumed
Cost of Sales Account Classifications
Chapter 6 – Review Questions
Chapter 7 – Fixed Asset Accounting
What are Fixed Assets?
Fixed Asset Classifications
Accounting for Fixed Assets
The Capitalization Limit
The Base Unit
The Initial Measurement of a Fixed Asset
The Purpose of Depreciation
Sum-of-the-Years’ Digits Method
Double-Declining Balance Method
Units of Activity Method
The Depreciation of Land
The Depreciation of Land Improvements
Depreciation Accounting Entries
Abandoned and Idle Assets
Asset Disposal Accounting
Chapter 7 – Review Questions
Chapter 8 – Interest Capitalization
Overview of Capitalized Interest
When to Capitalize Interest
The Interest Capitalization Period
The Capitalization Rate
Calculating Interest Capitalization
Chapter 8 – Review Questions
Chapter 9 – Debt Accounting
Basic Debt Accounting
The Amortization Schedule
Reconciling the Debt Account
Chapter 9 – Review Questions
Chapter 10 – Income Taxes
Sole Proprietorship Taxes
C Corporation Taxes
S Corporation Taxes
Tax Reduction Strategies for Small Businesses
Chapter 10 – Review Questions
Chapter 11 – Other Accounting Topics
Chapter 11 – Review Questions
Chapter 12 – Controls
The Proper Balance of Control Systems
The Nature of Risk
The Failings of Internal Controls
Preventive and Detective Controls
Manual and Automated Controls
Constructing a System of Controls
Common Fraud Risk Factors
Hospitality Industry Risk Characteristics
Hospitality Industry Fraud
Controls for the Small Organization
Chapter 12 – Review Questions
Chapter 13 – Pricing Methodologies
Price Elasticity of Demand
Cross Price Elasticity of Demand
Cost Markup Pricing (Meals)
Investment-Based Pricing (Room Rates)
Hubbart Formula (Room Rates)
Hubbart Formula (Meal Pricing)
Contribution by Meal Period
Discounting of Room Rates
Room Revenue Yield Analysis
Price Increase Considerations
Chapter 13 – Review Questions
Chapter 14 – Ratio and Trend Analysis
Interpretation of Financial Statements
Accounts Payable Turnover Ratio
Accounts Receivable Turnover Ratio
Inventory Turnover Ratio
Fixed Asset Turnover Ratio
Sales to Working Capital Ratio
Debt to Equity Ratio
Fixed Charge Coverage
Net Profit Ratio
Return on Net Assets
Hotel Operating Ratios
Paid Occupancy Percentage
Complimentary Occupancy Percentage
Average Occupancy per Room
Average Room Rate
Revenue per Available Room
Revenue per Available Customer
Hotel Market Share
Restaurant Operating Ratios
Average Food Service Check
Ratio of Beverage to Food Revenue
Limitations of Ratio Analysis
Chapter 14 – Review Questions
Chapter 15 – Cost Concepts
The Economics of Cost Management
What is Cost?
Basic Cost Types
The Cost Allocation Conundrum
Advantages of Cost Management
Chapter 15 – Review Questions
Chapter 16 – Cost-Volume-Profit Analysis
Margin of Safety
Chapter 16 – Review Questions
Chapter 17 – Operations Budgeting
The Advantages of Budgeting
The Disadvantages of Budgeting
The Operations Budget
The Operations Budget Format
The Flexible Budget
Formulation of the Budget
The Long-Range Budget
Types of Variances
Selling Price Variance
Sales Volume Variance
Purchase Price Variance
Material Yield Variance
Labor Rate Variance
Operating without a Budget
Chapter 17 – Review Questions
Chapter 18 – Capital Budgeting
Overview of Capital Budgeting
Time Value of Money
Present and Future Value Tables
Cost of Capital Derivation
Cost of Debt
Cost of Preferred Stock
Cost of Common Stock
Weighted Average Cost of Capital
Net Present Value Analysis
Internal Rate of Return
Incremental Internal Rate of Return
Capital Expenditure Proposal Analysis
Separate General Ledger / Subledger Accounts
Separate Accounting Module
Chapter 18 – Review Questions
Chapter 19 – The Lease or Buy Decision
The Lease Arrangement
The Lease or Buy Decision
Chapter 19 – Review Questions
Chapter 20 – Cash Management
The Difference between Net Income and Cash Flow
The Bank Reconciliation
The Daily Bank Reconciliation
The Cash Forecast
The Short-Term Cash Forecast
The Medium-Term Cash Forecast
The Need for Cash Concentration
The Zero Balance Account
Multiple Sweep Arrangements
Notional Pooling Problems
Notional Pooling Costs
Cash Concentration Best Practices
Cash Concentration Alternatives
Accounting for Cash Concentration Transactions
Accounting for Investments - Dividends and Interest Income
Stock Dividends and Stock Splits
Chapter 20 – Review Questions
Chapter 21 – Working Capital Management
The Cash Conversion Cycle
Accounts Receivable Enhancements
Accounts Receivable Policies
Accounts Payable Enhancements
Early Payment Discounts
Payment Processing Frequency
Accounts Payable Policies
Chapter 21 – Review Questions
Review Question Answers and Rationales
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