Introduction to Hotel Accounting by Esther Lau, Controller

Many people associate accounting with mathematics and numbers Many people associate accounting with mathematics and numbers. However, accounting is much more than numbers. Accounting assists in providing answers to many questions that hospitality managers raise, such as following:

How much cash is available to pay bills? What was the total payroll last pay period/ last month? How much does a current guest owe the hotel? (The answer is in the guest ledger.) What amount of food and beverage inventory was on hand at the beginning of the month? What are payroll costs as a percentage of room sales? What is the ratio of food and beverage sales to room sales this past month? How much do we owe our vendors? How much do our guests owe us? (Accounts Receivable and Guest Ledger)

ACCOUNTING is form of COMMUNICATION In other words, not only must information be accumulated and properly summarized, it must be communicated in a way that users understand. e.g. Income Statement, Statement of Cash Flow

Basic Accounting Principles: Generally Accepted Accounting Principles (GAAP) For example: Consistency e.g. Same depreciation method for fixed assets such as all equipments, building and furniture and fixtures.

Matching principle Matching principle refers to relating expenses to revenues. E.g. of accrual of payroll at the end of the month. Assume that employees have worked the last few days of the month and that the next pay date falls in the following month. The matching principle dictates that the unpaid payroll for the period be recognized both as expenses during the current accounting period and as a liability.

Full Disclosure Full Disclosure Might include the accounting method used, changes in the accounting methods, and unusual items.

Fundamental Accounting Equation: Assets = Liabilities + Owner’s Equity

Asset Accounts: Cash Accounts Receivable Notes Receivable Accrued Interest Receivable Marketable Securities Inventories of Merchandise Office Supplies (Inventories) Other Prepaid Expenses Investments Property and Equipment

Liability Accounts: Notes Payable Accounts Payable Taxes Charged to Guests and Withheld from Employees Incomes Taxes Payable Accrued Expenses Unearned Income (e.g. Advance Deposit) Mortgage Payable

Owners’ Equity Accounts: Capital Account

Revenues Accounts Room Sales Food Sales Beverage Sales Gift Shop Sales Banquet Sales Telephone Sales Parking Sales Space Rental Sales Interest Income Dividend Income

Expenses Accounts Food Expenses Beverage Expenses Wages Expenses Salaries Expenses Payroll Taxes Supplies Rent Cleaning Supplies Guest Supplies Utilities – Electricity, Gas, Fuel, Water Insurance – Health, General Liabilities Interest Advertising Expense Travel Expenses Property Taxes Depreciation Expenses Income Taxes

Debit and Credit =X= Increase and Decrease T-Accounts Debit and Credit =X= Increase and Decrease

Assets + -- Liabilities -- + Owners’ Equity -- + Revenues -- + DR CR Assets + -- Liabilities -- + Owners’ Equity -- + Revenues -- + Expenses + --

Examples and Exercises Examples and Exercises for posting journal entries (recording business transactions)

How to Post Entries Sales of Food for $200 Sales of Beverage for $150 Received in Cash for $120 Received in Credit Card for $230 Revenue of Food Revenue of Beverage   200 150 CASH Credit Card 120 230

Examples for Posting Entries Food Inventory Beverage Inventory   3500 2500 CASH Accounts Payable Purchase $3500 Food and will pay in one month Spend $2500 in cash to purchase Liquor

Exercises of Posting Entries Beginning of this month: We Have $10,000 in cash $50,000 in accounts receivable $15,000 in food inventory $20,000 in beverage inventory $5,000 in accounts payable due on 15th

General Ledger A group of accounts is defined as a ledger. The general ledger is the group of general accounts that includes accounts for assets, liabilities, owners’ equity, revenues, expenses, and owner’s drawing.