Basic Management Accounting for the Hospitality Industry

Transcription

1 Basic Management Accounting for the Hospitality Industry Michael N. Chibili First edition Noordhoff Uitgevers Groningen I Houten

2 Table of contents 1 Introduction to management accounting Setting the scene Information needs - management and external users Financial accounting and management accounting Basic principles of accounting The management accounting process Understand the hospitality industry The nature of the hospitality industry Goods and services offered The distinguishing features Industry organization and recent developments Summary of the key characteristics of the hospitality industry 25 Glossary 26 Multiple choice questions 28 Exercises 28 2 The balance sheet The components of a balance sheet Assets Liabilities Current liabilities Long term liabilities Owners'equity Formats of balance sheets and accounting standards Establishing simple balance sheets 43 Glossary 47 Multiple choice questions 49 Exercises 49 / 3 The profit and loss account statement Definition and categories of activities Formats and content of the profit and loss account statement 54 Glossary 60 Multiple choice questions 61 Exercises 61 4 Adjustments to the balance sheet and the profit and loss account Accounting conventions - accruals and recognition Adjusting the accounts 66 ""* Stock (inventory) Accounts receivable Depreciation and amortization Returns of goods Discounts Delivery charges 71 Glossary 72 Multiple choice questions 73 Exercises 73

3 5 The cash flow statement (also called the statement of cash flow) Cash in the business The importance of cash in the business Differentiating profits from cash The need for cash flow statements The categories of activities Establishing cash flow statements Determine the net cash flow from operating activities Determine the net cash flow from investing activities Determine the net cash flow from financing activities Collate all the previous 3 net cash flows into the definitive SCF A worked example in the establishment of the SCF using the indirect method 83 Glossary 89 Multiple choice questions 90 Exercises 90 6 Analyzing financial statements Purposes of analyzing statements Horizontal analysis Base-year analysis Vertical analysis 7 02 Glossary 706 Multiple choice questions 707 Exercises Ratio analysis and types of ratios Purpose and usefulness of ratio analysis Classification of ratios Liquidity ratios Solvency ratios Profitability ratios Activity ratios Operating ratios Performance review process 127 7A DuPont analysis 729 Glossary 7 33 Multiple choice questions 738 : Exercises 738 ; 8 Management of working capital The importance of working capital management The working capital cycle 142 Glossary 749 Multiple choice questions 750 Exercises Cost management The nature of costs and assumptions Types of costs Activity-based costing Allocating indirect (overhead) costs to the operating departments Responsibility accounting 760

4 9.4.2 Determining allocation bases Common methods of cost allocation Illustration of the direct method of cost allocation Illustration of the step method of cost allocation Separating mixed-costs between their fixed and variable elements High/low two-point method Scatter diagram Regression analysis 174 Glossary 7 77 Multiple choice questions 7 79 Exercises Pricing and revenue management The importance of pricing and the relationship between price and quantity Approaches to pricing Pricing rooms The rule of a thousand approach The bottom up approach (Hubbart formula or required rate of return) Relative room size approach Differential room pricing Calculating single and double rates Integrating the effects of seasonality Room rate discounting Pricing food and beverage products Subjective pricing methods The reasonable price method The highest price method The loss leader method The intuitive price method Objective pricing methods 7 96, Using a mark-up multiplier Contribution margin pricing method Ratio pricing method Simple prime costs method Specific prime costs method Menu engineering Revenue management 272 Glossary 275 Multiple choice questions 277 Exercises Cost-volume-profit analysis Definition, assumptions and limitations Contribution margin 220 ^ 11.3 Breakeven analysis Establishing the breakeven point Single service analysis Other considerations in breakeven analysis First situation - two room types Second situation - two room types plus additional services Third situation - integrating desired profit levels 228 Glossary 230 Multiple choice questions 237 Exercises 231

5 12 Internal control Need for internal control Special characteristics of the hospitality industry from an internal control perspective Principles of internal control Basic internal control proposals Bank reconciliation 249 Glossary 252 Multiple choice questions 253 Exercises Forecasting Nature and limitations of forecasting Understanding historical data patterns Approaches to forecasting Qualitative forecasting methods Quantitative forecasting methods Time series forecasting methods Causal forecasting methods Selecting forecasting methods Forecasting in hospitality industry practice 266 Glossary 267 Multiple choice questions 269 Exercises Budgeting and variance analysis The budget and the budget process Objectives of budgeting Approaches to budgeting and types of budgets Types of budgets Variance analysis Identifying and attributing variances Variance analysis overview Analyzing variances to ascertain causes 284 Glossary 290 Multiple choice questions 292 Exercises Capital investment decisions Types of capital budgeting decisions Basic methods for making investment decisions Simple and compound interest Process of discounting Understanding factor tables Discounted cash flow (DCF) methods Incidence of taxes on DCF analysis Choosing between projects 326 Glossary 328 Multiple choice questions 330 Exercises 330 (j

6 Literature 335 Answers to end of chapter multiple choice questions 335 Appendix Factor tables 337 About the author 350 Index 357