Hospitality Industry Financial Accounting, Fourth Edition
[Pages:5]TABLE OF CONTENTS
Hospitality Industry Financial Accounting, Fourth Edition
Authors: Raymond S. Schmidgall and James W. Damitio ISBN: 978-0-86612-451-5
Preface............................................................................ xiii
General Ledger......................................................................... 49
About the Authors.......................................................... xiv
1 Introduction to Accounting....................................... 3 Accounting Defined................................................................. 4 Bookkeeping Versus Accounting
Branches of Accounting......................................................... 4
Organizations Influencing Accounting................................ 6
Forms of Business Organization........................................... 7 Sole Proprietorships ? Partnerships ? Limited Partnerships Limited Liability Companies ? Corporations ? S Corporations
The Accounting Function in the Hospitality Industry....... 11
Journalizing............................................................................... 52 Standard Account Forms ? Posting ? The Trial Balance Compound Journal Entries
Comprehensive Illustration--Journalizing, Posting, and Preparing a Trial Balance........................................................ 58
Summary.................................................................................... 62
Endnote, Key Terms, Review Questions.............................. 64
Problems.................................................................................... 69
3 Accounting Adjustments............................................ 81 The Need for Adjustments..................................................... 81
Principles of Accounting........................................................ 15 Cost ? Business Entity Continuity of the Business Unit (Going Concern) Unit of Measurement ? Objective Evidence ? Full Disclosure Consistency ? Matching ? Conservatism ? Materiality Revenue Recognition
Overview of Financial Statements........................................ 19 Balance Sheet ? Income Statement ? Statement of Cash Flows
Cash Versus Accrual Accounting.......................................... 23
The Fundamental Accounting Equation............................. 24 Effects of Transactions on the Accounting Equation
Summary.................................................................................... 28
Endnotes, Key Terms, Review Questions............................ 29
Problems.................................................................................... 32
2 Accounting for Business Transactions..................... 41 Accounts.................................................................................... 41 Asset Accounts ? Liability Accounts ? Owners' Equity Accounts
Debit and Credit....................................................................... 45 Mechanics of Double-Entry Accounting Recording Changes in Assets, Liabilities, and Owners' Equity Recording Changes in Revenues and Expenses ? Recording Owner's Withdrawals ? Determining Account Balances Normal Balances
Cash Versus Accrual Accounting.......................................... 82
Classification of Adjusting Entries......................................... 83
Deferral Adjustments Illustrated............................................ 84 Prepaid Insurance/Insurance Expense ? Depreciation Expense Unearned Revenues
Accrual Adjustments Illustrated............................................ 87 Accrued Wages Payable ? Accrued Utilities ? Accrued Assets
Failure to Prepare Adjustments............................................. 90
Comprehensive Illustration--Adjustments......................... 90
Summary.................................................................................... 96
Key Terms, Review Questions............................................... 98
Problems.................................................................................... 99
4 Completing the Accounting Cycle............................ 109 The Accounting Cycle............................................................. 109 Adjusted Trial Balance ? Preparation of Financial Statements Closing Entries ? Post-Closing Trial Balance
The Worksheet.......................................................................... 119
Reversing Entries...................................................................... 122
Page 1
American Hotel & Lodging Educational Institute
TABLE OF CONTENTS
Hospitality Industry Financial Accounting, Fourth Edition
Authors: Raymond S. Schmidgall and James W. Damitio ISBN: 978-0-86612-451-5
Comprehensive Illustration-- Completing the Accounting Cycle....................................... 123
6 Balance Sheet.............................................................. 209 Purposes of the Balance Sheet............................................. 209
Summary.................................................................................... 127 Limitations of the Balance Sheet.......................................... 211
Key Terms, Review Questions............................................... 128 Balance Sheet Formats........................................................... 211
Problems.................................................................................... 129 5 Income Statement....................................................... 143 Major Elements of the Income Statement.......................... 143 Relationship with the Balance Sheet.................................... 144 Sales............................................................................................ 144 Cost of Goods Sold................................................................. 145 Expenses.................................................................................... 147 Gains and Losses...................................................................... 148 Income Taxes............................................................................ 149 Extraordinary Items.................................................................. 150 Earnings per Share................................................................... 151 Income Statements for Internal and External Users......... 151 Uniform System of Accounts................................................. 153 Internal Income Statements-- A Contribution Approach....................................................... 153 Contents of the Summary Operating Statement Departmental Statements...................................................... 158 Uniform System of Accounts for Restaurants.................... 160 Statement of Retained Earnings............................................ 160 Summary.................................................................................... 164 Endnote, Key Terms, Review Questions.............................. 166 Problems.................................................................................... 168 Chapter Appendix: Departmental Schedules..................... 178
Content of the Balance Sheet............................................... 212 Current Accounts ? Noncurrent Receivables ? Investments Property and Equipment ? Other Assets ? Long-Term Liabilities Owners' Equity ? Footnotes ? Consolidated Financial Statements
Summary.................................................................................... 225
Key Terms, Review Questions............................................... 225
Problems.................................................................................... 227
Appendix: Hilton Worldwide Holdings, Inc. Consolidated Financial Statements and Sample Notes... 236
7 Specialized Journals and Subsidiary Ledgers.......... 249 Control Accounts and Subsidiary Ledgers.......................... 249 Specialized Journals................................................................ 252 Sales Journal ? Cash Receipts Journal ? Purchases Journal Cash Disbursements Journal
General Ledger......................................................................... 262
General Journal........................................................................ 262
Payroll Journal.......................................................................... 262
Specialized Journals for Lodging Operations.................... 266
Computerized Systems........................................................... 268 Hardware ? Software ? Hotel Computer Systems
Summary.................................................................................... 269
Key Terms, Review Questions............................................... 270
Problems.................................................................................... 271
8 Cash.............................................................................. 283 Internal Control of Cash......................................................... 283
Voucher System....................................................................... 285 Preparation of a Voucher
Petty Cash.................................................................................. 287
Page 2
American Hotel & Lodging Educational Institute
TABLE OF CONTENTS
Hospitality Industry Financial Accounting, Fourth Edition
Authors: Raymond S. Schmidgall and James W. Damitio ISBN: 978-0-86612-451-5
Bank Reconciliation................................................................. 289 Preparing a Bank Reconciliation Illustration of a Bank Reconciliation
Gross Method of Recording Purchases............................... 293
Net Method of Recording Purchases................................... 293
Key Terms, Review Questions............................................... 335
Problems.................................................................................... 336
11 Property, Equipment, and Other Assets................. 343 Property and Equipment......................................................... 343 Lump Sum Purchase ? Depreciation
Credit Card Sales...................................................................... 294 Intangible Assets....................................................................... 352
Integrated Cash Management for Multi-Unit Operations............................................................. 295
Summary.................................................................................... 296
Key Terms, Review Questions............................................... 296
Problems.................................................................................... 298
9 Receivables and Payables.......................................... 305 Uncollectible Accounts Expense (Bad Debts).................... 306 Direct Write-Off Method ? Allowance Method
Notes Receivable...................................................................... 310 Interest-Bearing Notes
Notes Payable........................................................................... 314 Non-Interest-Bearing Notes
Summary.................................................................................... 317
Key Terms, Review Questions............................................... 317
Problems.................................................................................... 319
10 Inventory................................................................... 325 Periodic Versus Perpetual Inventory Systems.................... 325 Taking a Physical Inventory ? Consigned Goods Transportation Costs
Inventory Valuation Methods................................................ 329 Comparison and Evaluation of Inventory Valuation Methods
Estimating Ending Inventory and Cost of Goods Sold..... 331 The Retail Method ? The Gross Profit Method
Lower of Cost or Market (LCM)............................................. 333
Other Assets.............................................................................. 353
Summary.................................................................................... 353
Endnote, Key Terms, Review Questions.............................. 354
Problems.................................................................................... 357
12 Current Liabilities and Payroll................................. 363 Notes Payable........................................................................... 364
Accounting for Payroll-Related Liabilities........................... 366 Payroll Records ? Regular Pay and Overtime Pay Payroll Journal Entries ? Reporting Tips
Other Current Liabilities.......................................................... 378 Property Taxes
Summary.................................................................................... 379
Key Terms, Review Questions............................................... 379
Problems.................................................................................... 381
13 Partnerships.............................................................. 387 Advantages of Partnerships.................................................... 387 Ease of Formation ? No Partnership Taxes ? Synergy
Disadvantages of Partnerships.............................................. 388 Limited Life ? Mutual Agency ? Unlimited Liability
General Versus Limited Partnerships................................... 388
Partners' Capital and Drawing Accounts............................. 389
Formation of a Partnership.................................................... 389 Division of Income
Perpetual Inventory System................................................... 333 Summary.................................................................................... 334
Admission of a New Partner.................................................. 392 Withdrawal of a Partner.......................................................... 395
Page 3
American Hotel & Lodging Educational Institute
TABLE OF CONTENTS
Hospitality Industry Financial Accounting, Fourth Edition
Authors: Raymond S. Schmidgall and James W. Damitio ISBN: 978-0-86612-451-5
Liquidation of a Partnership................................................... 395 Classifying Bonds..................................................................... 427
Summary.................................................................................... 398 Other Features of Bonds........................................................ 428
Key Terms, Review Questions............................................... 398 Problems.................................................................................... 400 14 Corporate Accounting............................................. 407 Financial Statements................................................................ 407 Advantages and Disadvantages of the Corporation......... 407 Taxes........................................................................................... 408 Organizational Structure........................................................ 408 Forming a Corporation........................................................... 409 Common Stock........................................................................ 409 Dividends................................................................................... 410 Retained Earnings.................................................................... 411 Stock Subscription Plan.......................................................... 412 Preferred Stock......................................................................... 413 Cash Dividends Compared to Stock Dividends................. 414 Stock Splits................................................................................ 415 Treasury Stock........................................................................... 415 Book Value per Share of Common Stock........................... 416 Book Value Versus Market Value per Share Summary.................................................................................... 417 Key Terms, Review Questions............................................... 417 Problems.................................................................................... 419 15 Bonds, Leases, and Mortgages Payable.................. 425 Disadvantages and Advantages of Bond Financing.......... 426 Disadvantages of Bond Financing Advantages of Bond Financing
Journal Entries for Issuance of Bonds................................. 428 Bonds Sold Between Interest Payment Dates
Market Value Versus Face Value........................................... 429 Bonds Issued at a Discount ? Bonds Issued at a Premium
Year-End Adjusting Entries for Bonds Payable.................. 431
Effective Interest Rate Method of Bond Amortization..... 432
Bond Sinking Fund................................................................... 433
Convertible Bonds................................................................... 433
Retirement of Bonds............................................................... 434
Leases......................................................................................... 434
Pensions..................................................................................... 435
Mortgages Payable................................................................... 436
Summary.................................................................................... 437
Key Terms, Review Questions............................................... 437
Problems.................................................................................... 439
16 Investments in Corporate Securities...................... 445 Accounting for Investments.................................................. 445 Investments in Debt Securities ? Short-Term Equity Investments Long-Term Equity Investments
Valuation of Investments........................................................ 451 Held-to-Maturity Securities ? Trading Securities Available-for-Sale Securities
Summary.................................................................................... 453
Key Terms, Review Questions............................................... 453
Problems.................................................................................... 455
17 Statement of Cash Flows.......................................... 463 The Purpose of the Statement of Cash Flows................... 463
Page 4
American Hotel & Lodging Educational Institute
TABLE OF CONTENTS
Hospitality Industry Financial Accounting, Fourth Edition
Authors: Raymond S. Schmidgall and James W. Damitio ISBN: 978-0-86612-451-5
Classification of Cash Flows.................................................. 465
Conversion of Accrual Income to Net Cash Flows from Operations....................................................................... 467 Direct and Indirect Methods
Preparing the SCF.................................................................... 470 Step 1: Determining Net Cash Flows from Operating Activities Step 2: Determining Net Cash Flows from Investing Activities Step 3: Determining Net Cash Flows from Financing Activities Step 4: Presenting Cash Flows by Activity on the SCF Interpreting the Results
Accounting for Other Transactions...................................... 479
Summary.................................................................................... 481
Key Terms, Review Questions............................................... 481
Problems.................................................................................... 482
Profitability Ratios.................................................................... 521 Profit Margin ? Gross Operating Profit Margin Ratio Gross Operating Profit per Available Room ? EBITDA Margin Ratio Return on Assets ? Return on Owners' Equity ? Earnings per Share Price Earnings Ratio ? Viewpoints Regarding Profitability Ratios
Operating Ratios....................................................................... 527 Mix of Sales ? Average Daily Rate ? Revenue per Available Room Average Food Service Check ? Food Cost Percentage Beverage Cost Percentage ? Labor Cost Percentage Limitations of Ratio Analysis
Summary.................................................................................... 532
Endnote, Key Terms, Review Questions.............................. 535
Problems.................................................................................... 539
Index................................................................................ 551
18 Analysis and Interpretation of Financial Statements..................................................... 495 Analysis of Financial Statements........................................... 495
Horizontal Analysis................................................................... 498
Vertical Analysis........................................................................ 500
Trend Analysis........................................................................... 501
Request a review copy of Hospitality Industry Financial Accounting, Fourth Edition at desk-copy
Ratio Analysis............................................................................ 503 Ratio Standards ? Purposes of Ratio Analysis ? Average Versus Ending Value ? Classes of Ratios
Liquidity Ratios.......................................................................... 506 Current Ratio ? Acid-Test Ratio Operating Cash Flows to Current Liabilities Ratio Accounts Receivable Turnover ? Average Collection Period
Solvency Ratios......................................................................... 510 Debt-Equity Ratio ? Long-Term Debt to Total Capitalization Ratio Debt Service Coverage Ratio Number of Times Interest Earned Ratio Fixed Charge Coverage Ratio Operating Cash Flows to Total Liabilities Ratio
Activity Ratios............................................................................ 514 Inventory Turnover ? Property and Equipment Turnover Asset Turnover ? Paid Occupancy Percentage and Seat Turnover Complimentary Occupancy ? Occupancy Percentage Average Occupancy per Room ? Multiple Occupancy
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