Uniform System of Accounts & Income Statement

Chapter 2

Uniform System of Accounts

DefinitionA method of presenting financial statement information so that comparison is made easier between establishments or with hospitality industry averages

Uniform System of Accounts

System for classifying, organizing and presenting financial informationMost simply… a standard list of account names and numbers to be reported in standard format financial statementsThe Hotel Association of New York initiated the original Uniform System of Accounts for Hotels (USAH) in 1925

Advantages

Information can be collected on a large scale and comparedNational and regional averages can be created for different industry segmentsIndividual properties can use industry averages for management purposes

Income Statement

Income Statement

Purpose: to show economic results (income or loss) of business operations over a specified period of timeMajor elements: Revenues Expenses Income or loss

Revenues

Revenue is recognized when earned and not necessarily when received (accrual accounting)May have a variety of revenue sourcesIndividually list and then total operating revenues

RevenueFood Revenue $25,000Beverage Revenue 14,000Total Revenue

$39,000

Types of Revenue

Revenue: Room Revenue Food and Beverage Laundry Health Club, Golf, Spa Parking Gift Shop or Rental Telephone/Communications Miscellaneous and Other Income

Types of Expenses

Expenses are incurred in order to operate a business. They are recorded when incurred, not necessarily when payment is made. Types Cost of Sales Direct Operating Expenses Undistributed Operating Expenses Fixed Charges

Simple Income Statement

RevenuesCost of SalesGross ProfitExpensesIncome (Loss) Before Taxes

Starlight Piano LoungeIncome Statement

For the Month Ended September 30, 2004

RevenueFood Revenue $30,000Beverage Revenue 18,000Total Revenue $48,000

Cost of SalesFood Cost $9,850Beverage Cost 5,500Total Cost of Sales 15,350

Gross Profit $32,650

ExpensesWages Expense $14,000Cleaning Supplies Expense 1,100Marketing Expense 1,000Rent Expense 3,000Depreciation Expense 500Total Operating Expenses 19,600

Income (Operating) Before Taxes $13,050

Expenses

Direct Operating ExpensesUndistributed Operating ExpensesFixed Charges

Direct Expenses

Can be directly traced to a department and/or specific revenue-generating activities

Consist mostly of variable costs such as cost of sales, wages, suppliesAlso include fixed costs such as salaries*Controllable by departmental manager, who is held accountable for these results

Variable and Fixed Expenses

Variable Expenseschange with the volume of sales

Fixed Expensesremain same no matter what happens to the volume of sales

Indirect Expenses

Indirect expenses are not directly related to revenue producing activitiesTwo categories: Undistributed Operating Expenses Fixed Charges

Undistributed Expenses

Usually not traceable to one specific departmentIncurred by supporting departments, not revenue-generating departmentsAdministrative & GeneralMarketingProperty Operations & MaintenanceUtilities

Fixed Charges

Usually in this separate section because they are controlled by owners, not managers (unless they are the same)Usually only 4 accounts Rent or Property Taxes Insurance Interest Depreciation

PracticeCreate income statements Page 93P2.1 E2.2, E2.4, E2.8 on pp 91-92E2.2 TRACEABLE

E2.4Opening inventory + Purchases – Closing inventory = CoS $38,000 + $88,000 + $24,000 = $102,000

E2.8 a. Net assets, owner’s equity b. Contributory income c. Fixed asset d. Liabilities e. Contributory income

Problem P2.1 Page 93Income Statement Midlands Restaurant – Food dept’For a quarter ended March 31, 0011

Sales Revenue Grill Room $183,200Coffee Garden 82,900Banquets 294,400Total Revenue $560,500Net food Cost 224,200Gross Profit $336,300Expenses Wages & Salaries $176,400Employee meals 18,200Supplies 10,300Glass & Tware 4,300Laundry & Linen 13,500Licenses 2,400Printing 4,900Miscellaneous 8,200Total Expenses 238,200Departmental Contributory Income $ 98,100

REVIEW

1. Undistributed expenses2. Direct operating expenses3. Variable expenses4. Fixed expenses/charges5. Departmental contributory income6. Cost of sales7. Net cost of sales8. Adjustments to cost of sales9. Gross margin10.Operating income11.Net income12.Indirect expense13.Uniform system of accounts14.Chart of accounts15.What is the difference between a departmental

contributory income and a operating income?

1. P2.2Opening Inventory $2,782Purchases 9,807Closing Inventory (2,612)Cost of Sales Food $ 9,977Less: Employee Meals $219Less: promotional Meals 288Net Cost of Sales $9,470 2. P2.3Opening Inventory $15,357Purchases 47,879Closing Inventory (12,887)Add: Transfers in 68Less: Employee meals (1,828)Less: promotional Meals ( 219)Complimentary Meals (140)Transfers out ( 128)Net Cost of Sales $48,102

So Yesterday Restaurant

Prepare an income statement in proper format for So Yesterday Restaurant using the following information for the month of August 2012. Sales revenueFood $300,000Beverage $180,000Cost of salesFood $105,000Beverage $72,000Wages $192,000Menus $15,000Rent $10,000Insurance $2,000Depreciation Furn., Equip $19,000

So Yesterday RestaurantIncome Statement Period ending_____

Sales revenueFood $ Beverage Total Revenue $ Cost of Sales Food $Beverage (_________)Gross margin $ ExpensesWages $MenusRent InsuranceDepreciation furn _________ (________)Operating income $________

Forest Canopy Adventure Tours

Using the following financial information for the above stated company prepare an income statement in proper format for the month of April, 2012. (31 days)Sales revenue $18,000Wages $ 6,800Brochures $ 6,000Insurance $ 583Depreciation – van $ 792

Forest Canopy Adventure ToursIncome Statement

for month ending April 31, 2012 Revenues $18,000 ExpensesWages $6,800Brochures 6,000Insurance 583Depreciation-van 792

(14,175) Operating Income $

3,825

DEPARTMENTAL INCOME STATEMENT

DEPARTMENTAL SALES REVENUE-

DEPARTMENTAL EXPENSES=

DEPARTMENTAL CONTRIBUTORY INCOME

HOTEL PRIMO – FOOD & BEVERAGE DEPARTMENTINCOME STATEMENT FOR THE WEEK ENDING 31/12/2008

Sales Revenue food $25,000 beverage 15,000 $40,000Cost of Sales food $ 8,000 beverage 6,000 14,000Gross margin $26,000Expenses wages $ 6,500 salaries 5,000 laundry 900 linen 500 china 700 13,600Departmental Contributory Income $12,400

Calculating Cost of Sales

Opening/Starting Inventory+

Purchases-

Closing/Ending Inventory=

Cost of sales Opening inventory $ 5,000Add Purchases 25,000Less Closing Inventory 3,000 Cost of Sales $27,000

ADJUSTMENT TO COST OF SALES

COST OF SALESOpening Inventory + Purchases – Closing Inventory = Cost of

Sales

NET COST OF SALESCost of Sales – Adjustments to Cost of Sales = Net Cost of Sales

ADJUSTMENTS TO COST OF SALES Interdepartmental Transfers

Wine from the bar to the kitchenFruit from the kitchen to the bar

Employee MealsPromotional Expenses

ADJUSTMENTS TO COST OF SALES

Opening Inventory Sept 1 $ 2,000Purchases 32,000Closing Inventory Sept 30 4,000

Cost of Food $30,000

Transfers, kitchen to bar $ 250 employee meals cost 1,300 promotional meals cost 500 ( $

2,050) Transfers, bar to kitchen

150 Net cost of Sales

$28,100

HOTEL PRIMO – ROOMS DEPARTMENTINCOME STATEMENT FOR THE WEEK ENDING 31/12/2008

Sales Revenue rooms $56,000 space rental 2,000 $58,000Expenses wages $10,000 salaries 4,000 laundry 2,500 linen 1,900 cleaning 1,100 19,500 Departmental / Contributory Income $38,500

Food DepartmentIncome Statement for first quarter ended March 31, 0007

Sales RevenueGrill Room $183,200Coffee Garden 82,900Banquets 294,400 $560,500 Cost of SalesNet food cost (224,200)Gross Margin $336,300 Operating ExpensesSalaries, wages $176,400Employee meals 18,200Supplies expense 10,300Glassware, tableware 4,300Laundry, linen 13,500License expense 2,400Printing expense 4,900Misc expense 8,200 (238,200)Operating income $98,100Other income 800Departmenta lcontributory income $98,900

SUMMARY INCOME STATEMENTDEPARTMENTAL CONTRIBUTORY INCOMES

-UNDISTRIBUTED / INDIRECT EXPENSES

= INCOME BEFORE FIXED CHARGES

-FIXED CHARGE

=OPERATING INCOME

HOTEL PRIMO – SUMMARY INCOME STATEMENTFOR THE WEEK ENDING 31/12/2008

Departmental Contributory Incomes food & beverage $12,400 rooms & space rent 38,500 $50,900Undistributed expenses admin & general $12,000 marketing 4,000 property op. & maint 5,000 utilities 5,500 ( 26,500)Income before fixed charges $24,400Fixed charges property taxes $ 1,500 depreciation 15,000 (16,500)Operating Income $ 7,900Income Tax (25%) (1,975)Net Income $ 5,925

RESPONSIBILITY ACCOUNTING

REVENUE CENTERGenerates Sales Revenues with little or no

expenses

PROFIT CENTERGenerates Sales Revenue, has Expenses

COST CENTERGenerates no direct revenue

Distribution of Indirect Costs Page 72

Indirect costs can be distributed to the operating departments based on the follo0wing basisA. Sales revenue basis

Marketing, admin, insurance

B. Space basisMaintenance, utilities

A 1 add all departmental sales revenues 2 divide departmental revenues by the total to obtain percentage 3 split costs by appropriate %

B 1 calculate total usable space (square feet or meters 2 divide spaces of individual departments to obtain percentages 3 split costs by appropriate

Page 94 P2.2 & P2.3

P2.2Beginning inventory $2,782Purchases 9,807Ending inventory ( 2,612)Cost of sales (food) $9,977Less: employee meals $ 219Less: promotional meals 288 ( 507)Net of cost sales $9,470P2.3Beginning inventory $15,357Purchases 47,879Ending inventory ( 12,887)Cost of sales $50,349Add: transfers in 68Less: transfers out $ 128Less: employee meals 1,828Less: promotional meals 219Complimentary meals 140 (2,315)Net cost of sales $48,102

P2.1

FOOD DEPARTMENTINCOME STATEMENT

FOR THE FIRST QUARTER ENDED MARCH 31,0007

Sales RevenueGrill room $183,200Coffee garden 82,900Banquets 294,400 $560,500Cost of salesNet food costs (224,200)Gross margin $336,300Operating expensesSalaries, wages $176,400Employee meals expense 18,200Supplies expense 10,300Glassware 4,300Linen/laundry 13,500Licenses expense 2,400Printing 4,900Miscellaneous 8,200 (238,200)Operating income $ 98,100Other income 800Departmental income $98,900

STARLIGHT PIANO LOUNGEINCOME STATEMENT – WORKING PAPERS

ACCOUNT TITLE

REVENUE - FOOD $30,000

REVENUE - BEVERAGE $18,000

FOOD COST $9,850

BEVERAGER COST 5,500

WAGE EXPENSE 14,000

CLEANING SUPPLIE EXPENSE 1,100

MARKETING EXPENSE 1,000

RENT EXPENSE 3,000

DEPRECIATION EXPENSE 500

Starlight Piano LoungeIncome Statement

For the Month Ended September 30, 2004

RevenueFood Revenue $30,000Beverage Revenue 18,000Total Revenue $48,000

Cost of SalesFood Cost $9,850Beverage Cost 5,500Total Cost of Sales 15,350

Gross Profit $32,650

Operating ExpensesWages Expense $14,000Cleaning Supplies Expense 1,100

Marketing Expense 1,000

Rent Expense 3,000Depreciation Expense 500

Total operating expenses $19,600

Income Before Taxes $13,050

Prepare an income statement using the below information

Booga! Booga! Tavern Financial Information for Period Ended Jan31, 0012

1. Sales revenue $34,6002. Opening inventory 3,4003. Purchases 11,2004. Closing inventory 3,8005. Wages 8,4006. Supplies 2,4007. Laundry 1,4008. Rent 1,0009. Insurance 20010.Depreciation 50011.Misc 600

INCOME STATEMENT – REPORT FORMAT

Booga! Booga! TavernIncome Statement

For period ended January31,2009Sales revenue $34,600Cost of salesBeginning inventory $3,400Purchases 11,200Ending inventory 3,800 (10,800)Gross margin $23,800 ExpensesWage s $8,400Supplies 2,400Laundry 1,400Glassware 800Rent 1,000Insurance 200Depreciation 500 Misc 600 (15,300)Operating income $8,500

Prepare an Income Statement in Report Format from Following Information

D&D retaurant for period ended Jan 31,0012

1. Revenues $49,0002. Cost of sales 17,6003. Wages 15,8004. Laundry 1,2005. Supplies 3,4006. Other 2,4007. Rent 2,0008. Insurance 4009. Depreciation 2,00010.Interest 8000

Split costs between Operating costs and fixed charges

Income Statement - Report Format

D&D RestaurantIncome Statement

For period ending January 31, 2009Revenues $49,000Cost of sales 17,600Gross margin $31,400Operating expensesWages $15,800Laundry 1,200Supplies 3,400Other 2,400 ( 22,800)Income before fixed charges $8,600Fixed chargesRent $2,000Insurance 400Depreciation 2,000Interest 800 ( 5,200)Operating income $ 3,400

Page 95, P 2.5 Cindy’s Restaurant

Departments Dining Banquets Beverages

Sales revenue $204,000 $110,000 $92,000Cost of sales 81,600 41,800 29,440Gross profit $122,400 $ 68,200 $62,560

Operating costsWages &Salar $65,280 $35,200 $12,880Other direct 18,360 8,800 1,840Tot Direct 83,640 44,000 14,720

DepartmentalContributory income $38,760 $24,200 $47,840

Page 95 P2.5 Cindy’s Resataurant Consolidated Income Statement

Cindy’s Restaurant Consolidated Income StatementFor period ended 00,0012

Contributory incomesDining $38,760Banquets 24,200Beverages 47,840Total Contributory Incomes $110,800

Undistributed costsAdmin $12,000Marketing 10,000Utilities 5,000Maintenance 12,120Depreciation 14,000Insurance 4,000Total 57,120Operating Income $53,680