Financial Reporting

Chapter 2Financial ReportingCopyright © 2007 by John Wiley & Sons, Inc. All rights reservedChapter OverviewAccounting as the language of businessAccounting standards and principlesUniform systems of accountsFinancial statementsIncome statementBalance sheetStatement of cash flowCopyright © 2007 by John Wiley & Sons, Inc. All rights reservedChapter Overview cont.Management reportsDaily revenue reportDaily payroll cost reportRooms revenue forecastFood and beverage menu abstractAccounts receivable aging scheduleAccounting system - CP3 systemCopyright © 2007 by John Wiley & Sons, Inc. All rights reservedTypes of AccountingFinancial AccountingFocuses on financial statementsMust present:financial condition of the companyoperating resultsManagerial AccountingProvide timely operating resultsFocuses on: Revenues and expensesMaximizing operating performanceCopyright © 2007 by John Wiley & Sons, Inc. All rights reservedAccounting StandardsDevelop StandardsFinancial Accounting Standards Board (FASB)Securities and Exchange Commission (SEC) Generally Accepted Accounting Principles (GAAP)Govern all accounting and financial reportingCopyright © 2007 by John Wiley & Sons, Inc. All rights reservedAccounting PrinciplesCost PrincipleAll transactions must be recorded at costFull Disclosure PrincipleEvents that could impact a company’s financial position should be reflected on financial statements or footnotesRevenue Recognition PrincipleRevenues should be recorded in the month they are earnedCopyright © 2007 by John Wiley & Sons, Inc. All rights reservedAccounting Principles cont.Matching Principle All expenses incurred in generating a revenue should be recorded in the period the revenue is earnedMonetary Unit PrincipleOnly transactions that can be expressed in terms of money can be shown on a company’s financial statementsEconomic Entity PrincipleSeparates the dealings of a business from the private dealings of its owners Copyright © 2007 by John Wiley & Sons, Inc. All rights reservedAccounting Principles cont.Going Concern PrincipleRequires businesses to assume they will continue to operate long into the foreseeable futureTime Period PrincipleThe company must set specific time periods for measuring its financial resultsMateriality PrincipleSignificant revenues or expenses should have thier own account on the income statementCopyright © 2007 by John Wiley & Sons, Inc. All rights reservedUniform Systems of AccountsUniform System of Accounts for the Lodging IndustryUniform System of Accounts for RestaurantsUniform System of Financial Reporting for ClubsOther systems:TimeshareCondominiumHealth, racquet, and sports clubsSpasCopyright © 2007 by John Wiley & Sons, Inc. All rights reservedIncome StatementPresents operating results over a specific period of timeSections of the income statement:Revenues or SalesOperating ExpensesFor hotel properties:Departmental expensesUnallocated expensesCapital Expenses or Fixed CostsNet Income or Profit and LossCopyright © 2007 by John Wiley & Sons, Inc. All rights reservedSample Income StatementSample RestaurantIncome StatementFor the month ended June 30, 2008Revenues: Food $ 890,000 Beverage 220,000 Others 28,100 Total Revenues $ 1,138,100 Cost of Sales: Food $ 320,400 Beverage 48,400 Others 15,455 Total Cost of Sales $ 384,255 Gross Profit: Food $ 569,600 Beverage 171,600 Others 12,645 Total Gross Profit $ 753,845 Operating (Controllable) Expenses: Salaries and Wages $ 352,811 Employee Benefits 105,843 Direct Operating Expenses 68,286 Marketing 39,834 Utilities 44,386 Administration & General 28,453 Repairs and Maintenance 25,038 Music and Entertainment 31,867 Total Operating Expenses $ 696,517 Operating Income $ 57,328 Other (Non-controllable) Expenses: Rent $ 8,000 Depreciation 20,470 Interest 4,500 Total Non-controllable Expenses $ 32,970 Income Before Income Taxes $ 24,358 Copyright © 2007 by John Wiley & Sons, Inc. All rights reservedBalance SheetProvides a snapshot of a company’s financial positionCategories of accounts:AssetsCurrent AssetsFixed AssetsLiabilitiesCurrent LiabilitiesLong Term LiabilitiesEquityAssets = Liabilities + EquityCopyright © 2007 by John Wiley & Sons, Inc. All rights reservedSample Balance SheetDanforth's HotelBalance SheetsAs of December 3120072008Cash $ 8,000 $ 12,560 Accounts Receivable $ 2,000 $ 4,000 Marketable Securities $ 6,000 $ 6,000 Inventory $ 13,150 $ 15,000 Prepaid Rent $ 10,000 $ 13,500 Total Current Asset $ 39,150 $ 51,060 Furniture, Fixture & Equipment (FF&E) $ 8,560 $ 17,500 Accumulated Depreciation (FF&E) $ (3,030) $ (4,000)Building $ 20,000 $ 20,000 Long term Investments $ 30,000 $ 15,000 Long Term Assets $ 55,530 $ 48,500    Total Assets $ 94,680 $ 99,560 20072008Accounts Payable $ 15,000 $ 12,460 Accrued Payroll $ 7,500 $ 8,000 Accrued Taxes $ 8,560 $ 5,500 Total Current Liabilities $ 31,060 $ 25,960 Long Term Debt $ 22,500 $ 15,000 Owner's Equity $ 31,120 $ 40,620 Retained Earnings $ 10,000 $ 17,980 Total Owner's Equity $ 41,120 $ 58,600 Total Liabilities and Owner's Equity $ 94,680 $ 99,560 Copyright © 2007 by John Wiley & Sons, Inc. All rights reservedStatement of Cash FlowThree sections:Cash Flow from OperationsCash Flow from Investing ActivitiesCash Flow from Financing ActivitiesCopyright © 2007 by John Wiley & Sons, Inc. All rights reservedSample Statement of Cash FlowDanforth's HotelStatement of Cash FlowFor the Year Ended December 31, 2008Cash flows from operations:Net Income $ 7,980.00 Increase in depreciation $ 970.00 Increase in accounts receivables $ (2,000.00)Increase in inventory $ (1,850.00)Increase in prepaid rent $ (3,500.00)Decrease in account payable $ (2,540.00)Increase in accrued payroll $ 500.00 Decrease in accrued taxes $ (3,060.00) $ (3,500.00)Cash flows from investing activities:Purchase of FF&E $ (8,940.00)Sale of long term investments $15,000.00 $ 6,060.00 Cash flow from financing activities:Payment of long term debt $ (7,500.00)Increase in Owners' equity $ 9,500.00 $ 2,000.00 Total cash flows $ 4,560.00 Beginning cash balance $ 8,000.00 Add changes in cash $ 4,560.00 = Ending cash balance $12,560.00 Copyright © 2007 by John Wiley & Sons, Inc. All rights reservedManagement ReportsDaily Revenue ReportDaily Payroll Cost ReportRooms Revenue ForecastFood and Beverage Menu AbstractAccounts Receivable Aging ScheduleCopyright © 2007 by John Wiley & Sons, Inc. All rights reservedDaily Revenue Report ALL SPORTS RESORT As of Friday, 11/10/2008 Today KEY METRICS Period-to-DateActualBudgetLast Year ActualBudgetLast Year70.3%90.4%91.8%TOTAL OCCUPANCY %70.4%80.0%72.2%76.8%91.2%92.5%AVAILABLE OCCUPANCY %76.7%80.6%73.4%391 391 391 TOTAL ROOMS10,948 10,948 10,948 275 353 359 ROOMS SOLD7,706 8,753 7,900 279 357 362 OCCUPIED ROOMS7,818 8,835 7,971 4 3 4 COMPLIMENTARY ROOMS112 82 74 112 34 28 VACANT ROOMS3,130 2,113 2,974 358 388 388 AVAILABLE ROOMS10,052 10,866 10,758 46.40 77.83 65.42 REVPAR65.97 73.29 67.78 248 N/A267 ARRIVALS4,382 N/A4,382 122 N/A218 DEPARTURES4,149 N/A4,087 522 N/A636 GUESTS9,482 N/A9,734 46 78 136 ROOMS SOLD-Transient3,243 4,297 4,212 172 220 183 ROOMS SOLD-Group3,131 2,870 2,365 57 59 39 ROOMS SOLD-Contract1,332 1,586 1,335 85.61 111.06 81.29 AVERAGE RATE- Transient117.97 111.06 113.44 66.14 85.41 72.09 AVERAGE RATE- Group87.04 85.40 89.72 49.23 49.34 47.18 AVERAGE RATE- Contract48.57 49.34 49.00 Copyright © 2007 by John Wiley & Sons, Inc. All rights reservedDaily Payroll Cost ReportDaily Payroll ReportFlorencia Hotel and Conference CenterDate: 6/5/2008DailyMonth-to-DateRoomsRegularOvertimeTotalPayroll $%RegularOvertimeHoursPayroll $Payroll %Budgeted %Front Desk38.100.0038.10$565.792.10%671.981.67673.65$9,930.643.99%3.49%Reservations13.030.0013.03$206.700.77%269.2714.66283.93$4,131.341.66%1.74%Guest Services22.030.0022.03$252.390.94%338.0915.84353.93$4,412.271.77%1.98%Housekeeping85.700.0085.70$905.153.35%1,685.39125.351,810.74$19,480.017.82%9.50%Management0.000.000.00$0.000.00%0.000.000.00$0.000.00%0.30%Total Rooms158.860.00158.86$1,930.037.15%2,964.73157.523,122.25$37,954.2615.24%16.70%DailyMonth-to-DateBudgetRoomsRegularOvertimeTotalPayroll $Cost/RoomRegularOvertimeHoursPayroll $Cost/RoomCost/RoomFront Desk38.100.0038.10$565.79$3.93671.981.67673.65$9,930.64$6.23$5.29Reservations13.030.0013.03$206.70$1.44269.2714.66283.93$4,131.34$2.59$2.64Guest Services22.030.0022.03$252.39$1.75338.0915.84353.93$4,412.27$2.77$3.00Housekeeping85.700.0085.70$905.15$6.291,685.39125.351,810.74$19,480.01$12.23$14.43Management0.000.000.00$0.00$0.000.000.000.00$0.00$0.00$0.45Total Rooms158.860.00158.86$1,930.03$13.402,964.73157.523,122.25$37,954.26$23.83$25.36Copyright © 2007 by John Wiley & Sons, Inc. All rights reservedRooms Revenue ForecastFORECAST: as of 11/30/08City:Los AngelesProperty:Huntington - Airport # Rooms:86Division:RoomsHuntington Los Angeles Airport12-Day Forecast Report12/1/0812/2/0812/3/0812/4/0812/5/0812/6/0812/7/0812/8/0812/9/0812/10/00812/11/0812/12/08Avail Rooms868686868686868686868686Forecast #555326253648465353652323Forecast Occupancy %63.95%61.63%30.23%29.07%41.86%55.81%53.49%61.63%61.63%75.58%26.74%26.74%Net Rooms Revenues621553132653272440505272474153135157615323002473Average Rate $113.00 $ 100.25 $ 102.04 $ 108.96 $ 112.50 $ 109.83 $ 103.07 $ 100.25 $ 97.30 $ 94.66 $ 100.00 $ 107.52 Copyright © 2007 by John Wiley & Sons, Inc. All rights reservedFood and Beverage Menu Abstract    Food Menu Abstract  Date:January-March, 2008Restaurant:Mexicana Cantina  MealPeriod:Lunch           Menu Item NameNumberMenuItemItem ItemMenuMenuMenu SoldMixFoodSellingCMCostsRevenuesCM (MM)%CostPrice(E - D)(D * B)(E * B)(F * B)Bean, Cheese and Jalapeno Nachos1701.21%$2.44 $7.25 $4.81 $414.80 $1,232.50 $817.70 Beef, Bean, Cheese and Jalapeno Nachos1801.29%$2.78 $8.50 $5.72 $500.40 $1,530.00 $1,029.60 Chicken Fajita, Bean, Cheese and Jalapeno Nachos2221.59%$2.83 $9.95 $7.12 $628.26 $2,208.90 $1,580.64 Beef Fajita, Bean, Cheese and Jalapeno Nachos2531.81%$3.28 $9.95 $6.67 $829.84 $2,517.35 $1,687.51 Cheese Quesadillas1951.39%$1.64 $7.75 $6.11 $319.80 $1,511.25 $1,191.45 Chicken Fajita Quesadillas2862.04%$2.02 $8.95 $6.93 $577.72 $2,559.70 $1,981.98 Beef Fajita Quesadillas2591.85%$2.48 $8.95 $6.47 $642.32 $2,318.05 $1,675.73 Shrimp and Scallop Quesadillas1581.13%$3.82 $11.50 $7.68 $603.56 $1,817.00 $1,213.44 Shrimp Quesadillas1761.26%$3.44 $11.50 $8.06 $605.44 $2,024.00 $1,418.56 Spinach Quesadillas1250.89%$1.83 $8.50 $6.67 $228.75 $1,062.50 $833.75 Mixed Vegetable Quesadillas910.65%$1.75 $8.50 $6.75 $159.25 $773.50 $614.25 Mixed Vegetable Queso Flameado370.26%$1.24 $7.50 $6.26 $45.88 $277.50 $231.62 Copyright © 2007 by John Wiley & Sons, Inc. All rights reservedAccounts Receivable Aging ScheduleAging Schedule for Hanover Country ClubMembersTotalNumber of Days Past Due1-3031-6061-90Over 90C. DeCarlo$200$200T. Vangard$450$450J. Samuel$100$100F. Engel$320$320M. Pratel$335$335M. Morgan$600$600Others$26,875$14,000$10,000$1,000$2001,675Total$28,880$14,200$10,450$1,600$535$2,095Estimated uncollectible1.5%2.0%10%20%40%Total Bad Debts$1,527$213$209$160$107$838Copyright © 2007 by John Wiley & Sons, Inc. All rights reservedCP3 SystemTool that can help budget cash properlyFour components:Monthly Commitment BudgetPurchase Order SystemDaily Payroll System ReportDaily Profit and Loss StatementCopyright © 2007 by John Wiley & Sons, Inc. All rights reserved