Accounting for Hospitality Industry

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9780139738845: Accounting for Hospitality Industry

This book provides readers with a balanced mix of accounting theory and practice, tailored to the special needs of the hospitality service industries. It gives attention to the unique accounting and operating characteristics that are of major concern to managers in the hospitality industry in the new millennium. In simple, straightforward language, this book helps managers in the hospitality industry acquire a basic understanding of how financial statements are used and manage a firm more efficiently. Current coverage of emerging issues and techniques are covered. For hospitality managers.

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From the Back Cover:

Focusing on clear and detailed coverage of accounting principles and procedures geared to the hospitality environment of the new millennium, Accounting for the Hospitality Industry provides current and future hospitality managers with the skills needed to face future industry challenges. With their collective teaching experience of close to five decades, Professors Moncarz and Portocarrero equip hospitality management students with accounting knowledge and expertise that will be essential for success in the hospitality industry of the 21st century.

Special features of this text that facilitate the learning process include:
  • Organized into three sections — each of which may be taught independently
  • The "why" and "how" of accounting concepts and procedures emphasized throughout
  • An innovative approach that emphasizes the importance of matching expenses against revenues to help understand the process of adjusting entries
  • Full recognition, where appropriate, of current pronouncements of the Financial Accounting Standards Board and other accounting authorities
  • A brief explanation of Canadian payroll taxes
  • A chart of accounts based on a slight simplification of the Uniform System of Accounts for the Lodging Industry
  • A complete set of financial statements for Outback Steakhouse
  • A Companion Website that offers students the framework for solving exercises and problems in Excel spreadsheet format

Using a simple, logical flow of information, it is designed not only to teach accounting and accounting procedures but more importantly, to make students aware of the usefulness of accounting to hospitality industry managers.

Excerpt. © Reprinted by permission. All rights reserved.:

Accounting for the Hospitality Industry is designed to provide students with an advantageous mix of accounting theory and practice and is tailored to the special needs of the hospitality service industries. Much of the content of this book is the result of the authors' extensive experience as professional accountants, as professors in the accounting and finance program of the School of Hospitality Management at Florida International University, as authors of other hospitality-related textbooks, and as developers of WebCT-based courses that are taught over the Internet. Collectively, the authors have been teaching accounting and finance at Florida International University's School of Hospitality Management for almost fifty years. This book represents a melding of their opinions and expertise.

Most of the existing books dealing with introductory accounting are not suitable for students of hospitality management because they focus on techniques, tools, and procedures that are mostly applicable to manufacturing firms, retail firms, or other non-hospitality industries. This book gives attention to the unique accounting and operating characteristics that are of major concern to managers in the hospitality industry in the new millennium, and in so doing it fills a great need in the industry.

Ever since the authors published their earliest book, Financial Accounting for Hospitality Management in 1986 (published by AVI Publishing Company, which was later acquired by Van Nostrand Publishing Company), the book has consistently maintained a unique appeal to students because of its clarity and depth. Students found the book helpful in their studies and as an ongoing supportive resource in their successful careers. While some of this information is included in this text, the data has been further clarified, restructured, or updated as a result of new thinking and developments affecting the hospitality and financial environment.

As a result of globalization, hospitality managers can no longer count on working primarily in the mostly stable North American environment. They must operate in countries with different laws, economic systems, and accounting systems. Furthermore, the North American business climate is itself impacted by the rest of the world in an unprecedented manner. Hyperinflation and overbuilding in the 1980s and the lack of financing and industry slowdown in the early 1990s led hotel firms with large amounts of property, purchased many years ago, to sell these properties and place more emphasis on management rather than ownership. E-commerce places new accounting demands on hospitality businesses as it introduces new ways of generating sales, as well as more scientific ways of handling accounts receivable and inventories. Outsourcing their support services, especially involving e-commerce, is now an option that hospitality firms must consider if they are to remain competitive, for which it is essential to know the true cost of in-house services. Greater per-worker productivity and trends in demand, largely the result of the Internet's impact on the hospitality industry, force companies to restructure—requiring, also, a restructuring of their accounting systems and procedures.

Recent statistics and forecasts indicate that the hospitality industry will face an ever more fluid and changing environment in the future. Exchange rate risks will be a growing concern, and, most recently, if the risk of energy deprivation grows, it will force hospitality firms to consider internal sources of power. Future industry focus on maximizing the firm's value requires the manager to understand operations, the business environment and how to make risk management decisions. This understanding comes only from a thorough knowledge of accounting terminology, accounting systems, and accounting controls. Indeed, the manner in which management is capable of dealing with such future uncertainties, including changes in economic growth and increased government regulations, will make the difference between business success and failure.

In addition to the aforementioned challenges stemming from its operating venue, the hospitality industry also faces unique challenges posed by the following internal, distinctive characteristics:

  1. It is labor intensive.
  2. It is capital intensive.
  3. It is highly leveraged.
  4. It has its own Uniform Systems of Accounts.

Because labor costs consume approximately one third of every revenue dollar, managers must be able to understand the accounting controls essential to avoid the disproportionate growth of such a large expense category. Furthermore, low-cost competition from countries with lower labor costs reduces profit margins. Managers must also be able to understand the accounting calculations and the accounting terminology that accompany the financial negotiations necessary to obtain the large amounts of capital needed by firms in this industry. Finally, the use of high leverage adds considerable risk to hospitality firms, which requires them to walk a financial tightrope between maximizing growth without exceeding their ability to meet their debt obligations. Frequent interest rate changes make this even more difficult. They require that managers be aware of the accounting impact of these changes on their business and on how interest rates affect their company's leverage. As stated above, knowledge of accounting terminology, accounting systems and accounting controls is essential under such circumstances in order to minimize the risks posed by the increasingly fluid economic and business environment as well as the shrinking margins introduced by global competition. This book is designed to make the first step towards acquiring this knowledge and expertise easily understandable, and it is designed, as well, to give recognition to the hospitality industry paradigm, its unique needs, and its unique system of accounts.

WHO CAN BENEFIT FROM THIS BOOK?

This book is primarily designed to meet the needs of future hospitality managers, as well as those who are currently in the industry and did not have the opportunity to become familiar with accounting prior to becoming managers of hospitality firms.

It will help those already in management to develop a better understanding of the origin of accounting information and its uses, which are essential for managers, or future managers, to be able to:

  1. Better evaluate their own performance,
  2. Evaluate the performance of managers whom they supervise,
  3. Know what information an accounting system is capable of providing to improve decision-making, and manage a firm more efficiently,
  4. Acquire a basic understanding of how financial statements are used to make decisions about the future of the organization,
  5. Discuss his, or her, firm's accounting system knowledgeably with the firm's stakeholders.

Thus, it is uniquely suited for management development programs.

It is also designed to enable students with no accounting background to become acquainted with the accounting process and the information an accounting system is capable of providing. The text can be used by:

  1. Students in first-semester accounting courses offered by four-year hospitality management education programs, or by
  2. Junior colleges offering hospitality-related programs leading to an associate degree, or by
  3. Graduate students of hospitality management who have had limited exposure to business and accounting.

Since the sections of this book are, for the most part, independent of each other, the book can be easily adapted to the requirement of any appropriate accounting course in a hospitality management program by omitting or extending one or more chapters.

No previous exposure to accounting or business is required prior to using this text.

FEATURES OF THIS BOOK

One of the major advantages of this book is that it is organized into three sections, each of which may be taught independently of the others. Section I provides the required background for understanding accounting. This includes introducing the student to accounting terminology, the basic accounting concepts, various forms of business entity that are used in the hospitality industry, and the accounting cycle. Section II deals with a more elaborate discussion of the major financial statements. Section III explains some selected, commonly-used accounting processes in greater detail than they are presented in Section I.

Section I: The Accounting Framework and Procedures (Chapters 1-8)
Section II: Financial Statements (Chapters 9-10)
Section III: Selected Topics (Chapters 11-13)

In addition to presenting a clear and comprehensive discussion of financial and managerial topics geared to the hospitality industry, this textbook includes other important features, such as:

  1. A step-by-step explanation of the accounting cycle of a hospitality service-type business in Section I.
  2. A very innovative way of emphasizing the importance of matching expenses against revenues to help students understand the process of adjusting the trial balance.
  3. An in-depth examination of the statement of income based on the Uniform System for the Lodging Industry (ninth revised edition), presented in Section II.
  4. A more detailed treatment of special topics (presented in Section III). These topics include payroll accounting, receivables, inventory, payables, property and equipment, corporation accounting and financial analysis.
  5. Develops student expertise in several areas and provides limited practice in using accounting information for managerial purposes.
  6. An extensive glossary of new items, presented at the end of each chapter, and an index that appears at the end of the book, serve as useful reference tools by enabling readers to locate key accounting and business terms easily.
  7. Use of simple, straightforward language throughout the book.
  8. A discussion of appropriate provisions of the wage-hour law and payroll tax laws affecting the hospitality industry.
  9. Inclusion of a brief explanation of Canadian payroll taxes in response to the request of Canadian adopters of our earlier book.
  10. A chart of accounts based on a slight simplification of the Uniform System of Accounts for the Lodging Industry (see Appendix A).
  11. The "why" and "how" of accounting concepts and procedures is emphasized throughout the text.
  12. A review of major disclosures found in financial statements of hospitality firms.
  13. Full recognition, where appropriate, of current pronouncements of the Financial Accounting Standards Board and other authoritative bodies.
  14. A complete set of financial statements of the hospitality firm Outback Steakhouse is included in Appendix B.

Assignment material may be selected from questions, exercises, and problems at the end of most chapters to accommodate a wide variety of student comprehension and interest. Questions provide a review of the key ideas and major points covered in the text, whereas exercises and problems are more comprehensive in scope and are arranged in order of increasing difficulty. Problems are grouped under separate headings for shorter problems and for longer problems. The framework for solving these exercises and problems in Excel spreadsheet format is provided online for student use.

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