Hotel Financial Statements

Uniform System of Accounts

1925 by Hotel Association of New York city 10th version revised in 2006. Special format for income statement and

balance sheet for hospitality businesses Nature of the operations and organization of the

hotels influences this format Revenue centers vs. support centers Direct expenses vs. indirect expenses Departmental income statements Responsibility accounting

Nature of OperationsHotel

Revenue Centers Support Centers

Rooms

Food and Beverage

Telephone

Gift Shop

Rentals and Other

Administrative and General

Data Processing

Human Resources

Maintenance

Marketind and Sales

Departmental Income Statements Expense Schedules

Departmental Income Statements

Three major operating areas:RoomsFood Beverage

Other significant revenue producing departments: Minor revenue centers

Food and beverage usually reported together

Departmental Income Statements

Includes revenues and expenses of that department only (direct expenses)

Revenues-Allowances=Net Revenue-Cost of Sales=Gross Profit-Payroll and Related Expenses-Other Direct Expense=Departmental Income (Contributory Income)

General Format

F&B Income Statements

Special feature of F&B Departmental Income StatementsCalculation of cost of food and beverage sold

Cost of food used Transfers from/to beverage department Cost of food sold Employee meals and cost of promotion meals Sale of scrap = reduction from cost of sales

Cost of Food Sold – Pr. 2.2

Beginning Inventory 2.428+ Purchases 8.907Total Available 11.335- Ending Inventory 1.611Cost of Food Used 9.724- Cost of Employee Meals 209- Cost of Promotion Meals 278Cost of Food Sold 9.237

Cost of Food Sold – Pr. 2.3

Beginning Inventory 14.753+ Purchases 48.798+ Transfers from bar 48- Transfers from kitchen 107Total Available 63.492- Ending Inventory 12.811Cost of Food Used 50.681- Cost of Employee Meals 1.208- Cost of Promotion Meals 410Cost of Food Sold 49.063

Revenues:Grill Room 153.100Cofee Garden 78.900Banquets 298.400Other Income 600

Total Revenue 531.000

Cost of Sales:Cost of Food Used 228.900- Employee Meals 17.200

Net Food Cost 211.700Gross Margin 319.300

Departmental Expenses:

Salaries and Wage. 191.600China, glassware 14.600Laundry and linen 13.000Licences 1.900Printing, stationary 4.900Various other 6.200

Total Departmental Expenses 232.200Departmental Income 87.100

Food Department Income Statement

Pr. 2.1

Use of Income Statement

Reveals important informationSales volumesSales level and cost relationsSales by departmentsOperational effectivenessContributory income percentagesBudgets and comparisons of actual and

budgets

Hotel Income StatementRooms Dept. I+S Food Dept. I+S Beverage Dept. I+S

Total Departmental Income

- Undistributed Operating ExpensesSupport Centers

= Income before Fixed Charges

Ownership Expenses- Fixed Charges

= Income before Taxes –Taxes = Net Income

Major Categories of Hotel I+S Operated Departments

Rooms Food and Beverage Minor Operated Departments

Undistributed Operating Expense Administrative and General Data Processing Human Resources Marketing Property Operation and Maintenance Energy Costs

Fixed Charges Rent, Property Taxes, Property Insurance Interest Expense Depreciaiton and Amortization

Revenue Centers

Support Centers

Ownership Related

Expenses

Departmental Incomes:Food Department 87.100Rooms 482.700Beverage 143.600Telephone -25.100Other Income 40.300

Total Departmental Income 728.600- Undistributed Operating Expenses

Admin. & Genaral 174.300Marketing 83.600Property, mainten. 74.900Energy 62.000

Total Undist. Expenses 394.800Income Before Fixed Charges 333.800- Fixed Charges

Insurance 5.200Property tax 43.100Interest 65.000Depreciation 125.700

Total Fixed Charges 239.000Income Before Tax 94.800Tax - %50 47.400Net Income 47.400

Hotel Income Statement – Summary Form

Inventory Valuation – Cost of Sales

Different inventory valuation methodsSpecific item costFirst-in-first-outLast-in-first-outWeighted average cost

Specific Item CostJune Received Issued Units Cost($)

1 2 182 6 8 208 3 5

12 3 215 10 12 2220 3 924 3 628 6 12 1930 2 10

Beg. Inv. 36Puchases 454End.Inv. 204Cost of Sales 286

Ending Inventory2 20 404 22 884 19 76

204

First-in First-OutFIFO

June Unit Cost Unit Cost Unit Cost Total1 2 18 362 6 20 2 18 36

6 20 1208 2 18

1 20 5 20 10012 3 20 2 20 4015 10 22 2 20 40

10 22 22020 2 20

1 22 9 22 19824 3 22 6 22 13228 6 19 6 22 132

6 19 11430 2 22 4 22 88

6 19 114Ending 202

Received Issued Balance

454 288

Last-in First-OutLIFO

June Unit Cost Unit Cost Unit Cost Total1 2 18 362 6 20 2 18 36

6 20 1208 3 20 2 18 36

3 20 6012 3 20 2 18 3615 10 22 2 18 36

10 22 22020 3 22 2 18 36

7 22 15424 3 22 2 18 36

4 22 8828 6 19 2 18 36

4 22 886 19 114

30 2 19 2 18 364 22 884 19 76

Ending 200

Received Issued Balance

454 290

Weighed Average Cost

WAC

June Unit Cost Unit Cost Unit Cost Total WAC1 2 18 362 6 20 2 18 36

6 20 120 19,58 3 19,5 5 19,5 97,5

12 3 19,5 2 19,5 3915 10 22 2 19,5 39

10 22 220 21,5820 3 21,58 9 21,58 194,2524 3 21,58 6 21,58 129,528 6 19 6 21,58 129,5

6 19 114 20,2930 2 20,29 10 20,29 202,9167

Ending 202,9167

Received Issued Balance

454 287,08

Do Problem 2.4

Restaurant Departmental Contributory Income Statement- Without allocation of Indirect Expenses

Departmental IncomesDining Banquet Beverage Total

Sales 202.000 108.000 90.000 400.000Cost of Sales 81.000 41.000 28.000 150.000Wages&Salaries 64.455 34.795 12.000 111.250Other Direct Costs 18.640 8.960 1.600 29.200Contributory Income 37.905 23.245 48.400 109.550Indirect ExpensesAdm&General 13.000Marketing 9.000Utilites 6.000Prop.Op.&Maint. 12.000Depreciation 14.000Insurance 2.000Total 56.000Net Income 53.550

Allocation of Indirect Expenses

Based on an allocation key Artificial In this example: assume

Administrative & General and Marketing expenses to be allocated on the basis of sales volume

Dining: 202,000/400,000 = 50.5% Banquet: 108,000/400,00 =27.0% Beverage: 90,000/400,000 = 22.5%

All others to be allocated on square foot basis Dining room – 2400 sq.ft. Banquet – 3000 sq.ft. Service bar – 600 sq.ft.

Restaurant Income Statement-Allocation of Indirect Expenses

Departmental IncomesDining Banquet Beverage Total

Sales 202.000 108.000 90.000 400.000Cost of Sales 81.000 41.000 28.000 150.000Wages&Salaries 64.455 34.795 12.000 111.250Other Direct Costs 18.640 8.960 1.600 29.200Contributory Income 37.905 23.245 48.400 109.550Cont.Income % 18,8% 21,5% 53,8% 27,4%Indirect ExpensesAdm&General 6.565 3.510 2.925 13.000Marketing 4.545 2.430 2.025 9.000Utilites 2.400 3.000 600 6.000Prop.Op.&Maint. 4.800 6.000 1.200 12.000Depreciation 5.600 7.000 1.400 14.000Insurance 800 1.000 200 2.000Total 24.710 22.940 8.350 56.000Net Income 13.195 305 40.050 53.550

Revenue Mix Effect –Shift of $16,000 revenue from banquet to dining room.

Sales 218000 92000 90000 400000Cost of sales 87416 34926 28000 150342Wages 69560 29640 12000 111201Other Department. 18640 8960 1600 29200Contribu.Income 42384 18474 48400 109258

Allocated Exp.Adm&Gen 7085 2990 2925 13000Marketing 4905 2070 2025 9000Utilities 2400 3000 600 6000Prop Maint 4800 6000 1200 12000Depreciation 5600 7000 1400 14000Insurance 800 1000 200 2000

25590 22060 8350 56000Net Income 16794 -3586 40050 53258

Balance Sheet - Assets

Current AssetsCash on HandCash in BankMarketable SecuritiesCredit Card ReceivablesAccounts Receivable Inventories

Food and beverages, suppliesPrepaid Expenses

Balance Sheet - Assets

Fixed AssetsLand, Building, Furniture and Equipment

-Accumulated DepreciationChina, Glass, Silver, Linen and UniformsOther Assets

Deposits Investments Leasehold costs and leasehold improvements Deferred Expenses

Balance Sheet - Liabilities

Current Liabilities Accounts payable Accrued Expenses Income Tax Payable Unearned Income – Deposits and credit balances Current Postion of Long Term Mortgage Dividends Payable

Long Term Liabilities

Balance Sheet - Equity

Capital Stock Capital Surplus – Paid-in-Capital in

Excess of Par Value Retained Earnings

Review Exhibit 2.8 and 2.9Do Problem 2.7

Balance Sheet Limitations

Historical cost: does not show market value Some qualitative aspects totally ignored- such

as goodwill Human resources not treated as assets Subjective matters such as depreciation Shows result only for a moment – window

dressing