Cha13 Financial Mgmt

Chapter 13

Financial Management

Food and Beverage Operations

1Sunday, May 24, 2009

Chapter Objectives Describe the origins and the advantages

of uniform systems of accounts. Explain how an operations budget is used

as a standard. Identify the components and uses of

income statements and balance sheets

LIU, HOST154 MCC Hospitality & Tourism


Chapter Objectives (cont.) Describe and calculate liquidity,

solvency, activity, profitability, and operating ratios.

Briefly discuss fundamental accounting tasks typically performed by software programs.



Managing the Accounting System

Staff (advisory) personnel: managers, bookkeepers, and controller

Internal users: all managers

External users: owners and investors, creditors and lenders, government agencies, the public


General Accepted Accounting Unit of measurement

Historic cost Going

concernConservatism

ObjectivityRealization

MatchingConsistency


Cash Accounting vs. Accrual Accounting

Cash accounting: records transactions only when cash is received or paid out

Accrual accounting: records expenses incurred during an accounting period but are not actually paid until the following period◦ Conforms to matching principles

6Sunday, May 24, 2009Twotypesdependonsizeofopera1on

Advantages of a Uniform System of Accounts

Turnkey system for new business Standardized financial statement

formats Explanations of individual accounts Sample bookkeeping documents Continually revised



Advantages of a Uniform System of Accounts (cont.) Widely adopted and recognized

Provides common language and basis for comparison between operations

Facilitates reporting of industry statistics

Exhibit 1, p.353 The Restaurant Industry Dollar





The Operations Budget Profit plan◦ Projecting revenue◦ Determining profit requirements◦ Estimating expenses levels

Control tool◦ Budgets◦ Reports◦ Variances


10Sunday, May 24, 2009Budgetcontrolsandguidesprinciplesofbusiness

Accounting Techniques

Internal controls◦ Comparative statistical analysis◦ Planning and forecasting sales and cost of

goods sold◦ Dept. budgeting controls◦ Predetermined standards and evaluation

reports◦ Storage areas


Accounting Techniques (cont.)

◦ Cost analysis Fixed Variable Mixed◦ Cost-volume-profit (CVP) analysis Used to set specific profit objectives◦Cash budgeting helpful in managing property’s cash

flow


Uses of Income Statements

Financial statement that consists of info regarding the results of operations, including revenue, expenses, and profit

Financial statement on regular basis Efficiency of management Controllable expenses Supporting schedules



The Income Statement Calculating actual food cost/cost of sales◦ Cost of Sales = Beginning Inventory +

Purchase – Ending Inventory

◦ Food Cost Percentage = Food Cost of Sales / Food Revenue X 100



The Income Statements (cont.)Adjustment to basic cost of sales Exhibit 7 p.362

Cost of Sales : Food Charge to:Value of Beginning Inventory+ Purchases - Value of Ending InventoryUnadjusted Cost of Sales: Food+Transfers to Kitchen- Transfers from kitchen- Employee Meal Cost- Value of complimentary Meals

Food CostBeverage CostLabor CostPromotion Expense

Net Cost of Sales: Food



The Balance Sheet A finical statement giving the account

balances for:◦ Assets: current/liquidity or noncurrent◦ Liabilities: current or noncurrent ◦ Equity: the amount of the funds contributed

by the owners (the stockholders) plus the retained earnings (or losses)

Assets = Liabilities + Equity



Five Common Ratio Groups

1. Liquidity2. Solvency3. Activity4. Profitability5. Operating


Three standards:1.A past period2. Industry average

Return On Investment (ROI)

3.The budget


Liquidity Ratios & Solvency Ratios



Activity Ratios & Profitability Ratios

Food Inventory Turnover = Cost of Food Revenue/Average

Inventory

Profit Margin = Pretax Net Income/Total F&B

Revenue



Operating Ratios Food Cost Percentage =

Cost of Food Cost/Food Revenue

Beverage Cost Percentage = Cost of Beverages Sold/Beverage

Revenue Labor Cost Percentage =

Labor Costs/Total F&B Revenue



Operating Ratios (cont.)

Average Food Service Check = Total F&B Revenue/Guests Served

Seat Turnover =Number of Guests Served / Number of

Available Seats



Technology and the Accounting Process

Accounts receivable software Accounts payable software Payroll accounting software Financial reporting software





Fiscal Review

24

Describe the origins and the advantages of uniform systems of accounts.

Explain how an operations budget is used as a standard.

Identify the components and uses of income statements and balance sheets

Describe and calculate liquidity, solvency, activity, profitability, and operating ratios.

Briefly discuss fundamental accounting tasks typically performed by software programs.


Education

Cha13 Financial Mgmt