1. Introductory Accounting for the Hospitality Industry Financial Reports

2. Accounting Convention  Monetary convention  Accounting entity Convention The business is considered to operate as an independent, ongoing entity with an existence separate from both management and owners.  Going concern Convention The business is assumed to have a continuous existence- this extends the concept that a business has a life removed from that of its owners.

3. Accounting Conventions  Accounting period Convention. An identifiable period is determined so revenue and expenses can be matched to determine profit or loss.  Profit realisation Convention. Profit is only accounted for when it is realised by activity. This is at the point of sale whether it is credit or cash. If an Asset of the business increases in value, such gain can only be accounted for when it is sold and the increase in value is realised.  Conservatism doctrine. A traditional conservative approach towards the valuation of assets and profits.

4. Accounting Conventions  Historical cost convention. Transactions are recorded at cost value at the time of the transaction. Only when items have decreased in value over time are they likely to be shown as less than their original cost.  Disclosure Convention. The traditional tendency is to be cautious in accounting reports, providing for possible future losses such as doubtful debts, decrease in stock value and claims on the business.

5. Classification of Transactions  Assets: Items of value owned by the business.  Liabilities: Amounts owed by the business  Proprietorship: The ownership interest in the business.  Revenue: Inflow of assets to the business.  Expenses: Outflow of assets from the business.

6. The Balance Sheet Equation AAAAssets =Liabilities +proprietorship

7. The Balance Sheet Equation NNNNew Generation Cuisine BBBBS as at 1 April AAAAssetsFunds Provided by CCCCash in Bank=Proprietorship $$$$15,000=$15,000

8. The Balance Sheet Equation  New Generation Cuisine  BS as at 2 April  AssetsFunds Provided by  Cash in Bank2,000Capital15,000  Kitchen Equip8,000  Furniture5,000  Total 15,00015,000

9. The Balance Sheet Equation  New Generation Cuisine  BS as at 10 April  AssetsFunds Provided by  Cash in Bank2000Capital 15,000  Kitchen Equip8,000  Furniture5,000Liabilities  Stock on Hand3,000Bank o/draft 3000  Total18,000 18,000

10. The Balance Sheet Equation Assets –Current Assets –Fixed Assets –Non Current Assets Liabilities - Current Liabilities - Non Current Liabilities