Basic principles of accounting 16. 1.1.4. The management accounting process 18
. 1.2. Understand the hospitality industry 19. 1.2.1. The nature of the hospitality ...
Basic Management Accounting for the Hospitality Industry Michael N. Chibili
First edition Noordhoff Uitgevers Groningen I Houten
Introduction to management accounting 13 Setting the scene 14 Information needs - management and external users 14 Financial accounting and management accounting 75 Basic principles of accounting 16 The management accounting process 18 Understand the hospitality industry 19 The nature of the hospitality industry 19 Goods and services offered 20 The distinguishing features 23 Industry organization and recent developments 24 Summary of the key characteristics of the hospitality industry 25 Glossary 26 Multiple choice questions 28 Exercises 28
2 2.1 2.1.1 2.1.2 2.1.2.1 2.1.2.2 2.1.3 2.2 2.3
The balance sheet 3 7 The components of a balance sheet 32 Assets 32 Liabilities 36 Current liabilities 36 Long term liabilities 38 Owners'equity 39 Formats of balance sheets and accounting standards 42 Establishing simple balance sheets 43 Glossary 47 Multiple choice questions 49 Exercises 49 /
3 3.1 3.2
The profit and loss account statement 57 Definition and categories of activities 52 Formats and content of the profit and loss account statement 54 Glossary 60 Multiple choice questions 61 Exercises 61
4 4.1 4.2 4.2.1 4.2.2 4.2.3 4.2.4 4.2.5 4.2.6
Adjustments to the balance sheet and the profit and loss account 65 Accounting conventions - accruals and recognition 66 Adjusting the accounts 66 ""* Stock (inventory) 66 Accounts receivable 68 Depreciation and amortization 69 Returns of goods 70 Discounts 71 Delivery charges 71 Glossary 72 Multiple choice questions 73 Exercises 73
The cash flow statement (also called the statement of cash flow) 75 Cash in the business 76 The importance of cash in the business 76 Differentiating profits from cash 77 The need for cash flow statements 77 The categories of activities 78 Establishing cash flow statements 80 Determine the net cash flow from operating activities 80 Determine the net cash flow from investing activities 82 Determine the net cash flow from financing activities 83 Collate all the previous 3 net cash flows into the definitive SCF 83 A worked example in the establishment of the SCF using the indirect method 83 Glossary 89 Multiple choice questions 90 Exercises 90
Ratio analysis and types of ratios 7 7 7 Purpose and usefulness of ratio analysis 712 Classification of ratios 7 73 Liquidity ratios 114 Solvency ratios 7 76 Profitability ratios 7 79 Activity ratios 722 Operating ratios 725 Performance review process 127 DuPont analysis 729 Glossary 7 33 Multiple choice questions 738 Exercises 738
:
;
8 8.1 8.2
Management of working capital 141 The importance of working capital management 142 The working capital cycle 142 Glossary 749 Multiple choice questions 750 Exercises 750
9 9.1 9.2 9.3 9.4 9.4.1
Cost management 753 The nature of costs and assumptions 754 Types of costs 754 Activity-based costing 757 Allocating indirect (overhead) costs to the operating departments 760 Responsibility accounting 760
Determining allocation bases 767 Common methods of cost allocation 762 Illustration of the direct method of cost allocation 164 Illustration of the step method of cost allocation 766 Separating mixed-costs between their fixed and variable elements 7 69 High/low two-point method 770 Scatter diagram 7 73 Regression analysis 174 Glossary 7 77 Multiple choice questions 7 79 Exercises 7 79
Pricing and revenue management 783 The importance of pricing and the relationship between price and quantity 784 Approaches to pricing 785 Pricing rooms 786 The rule of a thousand approach 786 The bottom up approach (Hubbart formula or required rate of return) 787 Relative room size approach 788 Differential room pricing 7 90 Calculating single and double rates 7 90 Integrating the effects of seasonality 792 Room rate discounting 7 93 Pricing food and beverage products 795 Subjective pricing methods 796 The reasonable price method 7 96 The highest price method 796 The loss leader method 7 96 The intuitive price method 7 96 Objective pricing methods 7 96 , Using a mark-up multiplier 7 97 Contribution margin pricing method 200 Ratio pricing method 207 Simple prime costs method 202 Specific prime costs method 204 Menu engineering 208 Revenue management 272 Glossary 275 Multiple choice questions 277 Exercises 277
Cost-volume-profit analysis 279 Definition, assumptions and limitations 220 Contribution margin 220 ^ Breakeven analysis 227 Establishing the breakeven point 227 Single service analysis 222 Other considerations in breakeven analysis 225 First situation - two room types 225 Second situation - two room types plus additional services 226 Third situation - integrating desired profit levels 228 Glossary 230 Multiple choice questions 237 Exercises 231
Internal control 233 Need for internal control 234 Special characteristics of the hospitality industry from an internal control perspective 235 Principles of internal control 236 Basic internal control proposals 24 7 Bank reconciliation 249 Glossary 252 Multiple choice questions 253 Exercises 253
Forecasting 255 Nature and limitations of forecasting 256 Understanding historical data patterns 257 Approaches to forecasting 258 Qualitative forecasting methods 259 Quantitative forecasting methods 259 Time series forecasting methods 260 Causal forecasting methods 263 Selecting forecasting methods 265 Forecasting in hospitality industry practice 266 Glossary 267 Multiple choice questions 269 Exercises 269
14 14.1 14.2 14.3 14.4 14.5 14.5.1 14.5.2 14.5.3
Budgeting and variance analysis 273 The budget and the budget process 274 Objectives of budgeting 275 Approaches to budgeting and types of budgets 276 Types of budgets 280 Variance analysis 282 Identifying and attributing variances 282 Variance analysis overview 283 Analyzing variances to ascertain causes 284 Glossary 290 Multiple choice questions 292 Exercises 292
15 15.1 15.2 15.3 15.4 15.5 15.6 15.7 15.8
Capital investment decisions 295 Types of capital budgeting decisions 296 Basic methods for making investment decisions 297 Simple and compound interest 302 Process of discounting 304 Understanding factor tables 305 Discounted cash flow (DCF) methods 3 74 Incidence of taxes on DCF analysis 322 Choosing between projects 326 Glossary 328 Multiple choice questions 330 Exercises 330
