GAAP Training

What is GAAP?Generally Accepted Accounting Principles

-The common set of accounting principles, standards and procedures that companies use to compile their financial statements.

-GAAP are a combination of authoritative standards, set by policy boards, and are simply the commonly accepted ways of recording and reporting accounting information.

GAAP for HospitalityUSALI

-Uniform System of Accounts for the Lodging Industry

-The primary purpose of the Uniform System of Accounts for the Lodging Industry is to provide operating statements that are formatted to provide hotel owners, managers, and other interested parties with information and data that is pertinent to the unique operating environment of the lodging industry.

What will we be reviewing? - Accruals

- Franchise Fee Coding

- PrePaid Expenses

- Other Miscellaneous Account Coding: Challenges & Variances- General Notes on Accounting Procedures

Accruals - What is an Accrual? -Recognizing an Expense when it is Incurred

Regardless of when Cash is Disbursed.EXAMPLE: Linen order received/consumed in October – Invoice Not Received until November.

OctoberO NovemberO

ACCRUAL: Debit Linen +400.00Credit Accrued Other -400.00

REVERSE ACCRUAL: Credit Linen -400.00Debit Accrued Other +400.00INVOICE RECEIVED:Debit Linen +400.00

November NET CHANGE IN LINEN = 0

Accruals - What do we Accrue?

Utilities Example: Your Electricity bill only covers service through the 23rd

of September. We need to accrue the cost for the 24th through the 30th. Your accurate meter readings on the 1st of the month will allow this cost to be calculated. Travel Agent Commissions

Typically, most of your TA Commission invoices will not arrive until after the month is closed. A percentage of revenue based on prior month trends will be calculated and accrued.

Group Commissions Properties need to track their Groups on a monthly basis and

estimate what, if any, commissions will need to be paid. These commissions will need to be accrued into the month the business was consumed.

Expenses for any goods or services that were consumed in the month, for which no invoice has been received yet.

Fleet Card Expenses If you have incurred any gas or repair expenses in the month,

these will need to be gathered and accrued into Guest Transportation or Vehicle Repairs

Franchise, Reservation Fees & Loyalty Program Expense Depending on the Franchise, we may not receive an actual

Franchise Invoice until the middle of the following month. Franchise Fees are typically a percentage of your revenue or, in some cases, a flat fee. This will be calculated and accrued.

Reservation Fee estimates are calculated on a percentage of your revenue based on prior month trends.

Loyalty Program Expense will also be calculated on a percentage of revenue and accrued as such.

COST OF SALES Any costs incurred for revenues by any of the following revenue

generators will need to be accrued into the month. Audio Visual

What was our cost in generating the A/V revenue for the month?

Guest Movies How much is the bill we will be receiving for movies

watched by guests? Guest Laundry

How much will be charged by your local dry cleaner for the laundry that was sent out by guests?

Your reports and accurate information are crucial in all of these very important accruals!

PrePaid Expense- What is a PrePaid?-Expenditure that is paid for in one month, but

will not be consumed until a future period or multiple future periods.EXAMPLE: SINGLE PERIOD-

DOS purchased flight in October for travel in November to a Trade Show

OctoberO NovemberO

INVOICE RECEIVED: Debit Prepaid General +265.00

ALLOCATION: Credit Prepaid General -265.00Debit Travel +265.00

PrePaid Expense- Multiple Periods

EXAMPLE: Convention & Visitors Bureau Annual Dues for 10/2015-09/2016Invoice is for 2400.00 for 12 months of Dues

OctoberO NovemberO

INVOICE RECEIVED: Debit Prepaid General +2400.00

ALLOCATION: Credit Prepaid General -200.00Debit Dues & Subs +200.00

ALLOCATION: Credit Prepaid General -200.00Debit Dues & Subs +200.00

BALANCE REMAINING IN PREPAID: 2200.00 – 200.00 = 2000.00 (Continued for 10 more months)

BALANCE REMAINING IN PREPAID: 2400.00 – 200.00 = 2200.00

Account CodingFranchise Invoices- Coding and ChallengesTravel Agent Commissions VS Reservations Expense:

GDS = Reservations Expense

TA Commission 4070540000 23,956.09Reservations Expense 4073860000 3,120.15

Account CodingFranchise Invoices- Coding and ChallengesRes/Max = Reservations Expense

Reservations Expense 4073860000 3,410.76

Any Offsite Reservations Expense should be coded here

Account CodingFranchise Invoices- Coding and ChallengesReimbursement Credits/Free Night Reimbursements

Loyalty Program 7272700000 31,765.02A/R Clearing 22000100 (13,690.47)= TOTAL INVOICE 18,074.55

Enter as a negative

Post as Payment Received in City Ledger to offset

Account CodingOther Notable Coding Challenges- Common Mistakes:- Where would you code Armored Car

Service? A&G Security - Where would you code Newspapers that are free to guests?

A&G Bank Charges?

Media? Rooms – Comp Services & Gifts

Coding Variations: ITEM PRIOR Coding CORRECT ATRIUM CodingWarehousing/Storage Warehouse Service Rent-Property & Equip 9173820000

Group Commissions Group Booking Expense Commissions & Fees-Group 4070580000

PMS, POS, Sales, R&M Software Maintenance Systems Expenses IT Department (71) to their Respective Lines

Telephone Repairs & Costs Telephone COS & Repairs IT Department (71) to their Respective Lines

Any Associate Relations Item Employee Relations/Recruiting/Etc Human Resources 7071940000

Management Accounting Fees WHI Accounting Fees There are no Atrium Accounting Fees

Account CodingOther Notable Coding Differences and Variations: Transportation Expense:

Guest Transportation VS Vehicle Repairs 4071900000 7374500000 Gas Expense Maintenance/Repairs Taxi/Cab Costs Oil Changes, etc. Protection/Security Expense: A&G Security VS A&G Contract Labor 47073940000 7068100000One-Time Events Full-Time, 3rd

Party Security

Account Coding

Always include WHAT/WHY in the DescriptionHelp us determine if your coding is correct!

EXAMPLE DESCRIPTION: “Water Testing”Water Testing for the Kitchen? Water Testing for the Swimming Pool?

BETTER DESCRIPTION: “Pool Water Testing”

Account CodingCoding Challenges

What if you have Coding Questions?

- Ask your Staff Accountant- Your Staff Accountant can send you a

Cheat Sheet on Coding for your specific Franchise

- Ask the Director of Field Accounting

- Ask the Director of Audit & Compliance

General Accounting Notes- Invoices should be entered and posted as received- DO NOT HOLD

INVOICES Invoices should be entered no less than 2x per week

DON’T WAIT FOR END OF MONTH!- Expense Reports should be processed through PAYROLL> Do not write a Managers Check

- Mangers Checks should be sent to your Staff Accountant on a DAILY BASIS> Checks may be rejected by the bank if they are not

properly recorded on a daily basis through Reverse Positive Pay

- Provision for Doubtful Accounts / Bad Debt> This account should be used only for items that apply to Bad Debt as noted in SOP ACCTG AR004. This account is restricted to true Bad Debt Write Offs and may not be used for revenue adjustments, chargebacks, or out of balance adjustments.

Any Questions?

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