Introductory Accounting Introductory Accounting for the Hospitality Industryfor the Hospitality Industry

Financial ReportsFinancial Reports

Accounting ConventionAccounting Convention

Monetary conventionMonetary convention Accounting entity Convention Accounting entity Convention The The

business is considered to operate as an business is considered to operate as an independent, ongoing entity with an existence independent, ongoing entity with an existence separate from both management and owners.separate from both management and owners.

Going concern ConventionGoing concern Convention The business The business is assumed to have a continuous existence- this is assumed to have a continuous existence- this extends the concept that a business has a life extends the concept that a business has a life removed from that of its owners.removed from that of its owners.

Accounting ConventionsAccounting Conventions

Accounting period Convention. Accounting period Convention. An identifiable An identifiable period is determined so revenue and expenses can be period is determined so revenue and expenses can be matched to determine profit or loss.matched to determine profit or loss.

Profit realisation Convention.Profit realisation Convention. Profit is only Profit is only accounted for when it is realised by activity. This is at the accounted for when it is realised by activity. This is at the point of sale whether it is credit or cash. If an Asset of the point of sale whether it is credit or cash. If an Asset of the business increases in value, such gain can only be business increases in value, such gain can only be accounted for when it is sold and the increase in value is accounted for when it is sold and the increase in value is realised.realised.

Conservatism doctrine.Conservatism doctrine. A traditional conservative A traditional conservative approach towards the valuation of assets and profits.approach towards the valuation of assets and profits.

Accounting ConventionsAccounting Conventions

Historical cost convention. Historical cost convention. Transactions Transactions are recorded at cost value at the time of the are recorded at cost value at the time of the transaction. Only when items have decreased in transaction. Only when items have decreased in value over time are they likely to be shown as value over time are they likely to be shown as less than their original cost.less than their original cost.

Disclosure ConventionDisclosure Convention. The traditional . The traditional tendency is to be cautious in accounting reports, tendency is to be cautious in accounting reports, providing for possible future losses such as providing for possible future losses such as doubtful debts, decrease in stock value and doubtful debts, decrease in stock value and claims on the business.claims on the business.

Classification of TransactionsClassification of Transactions

Assets: Assets: Items of value owned by the business. Items of value owned by the business.

Liabilities: Liabilities: Amounts owed by the businessAmounts owed by the business

Proprietorship: Proprietorship: The ownership interest in the The ownership interest in the business.business.

Revenue: Revenue: Inflow of assets to the business. Inflow of assets to the business.

Expenses: Expenses: Outflow of assets from the business.Outflow of assets from the business.

The Balance Sheet EquationThe Balance Sheet Equation

Assets =Liabilities +proprietorshipAssets =Liabilities +proprietorship

The Balance Sheet EquationThe Balance Sheet Equation

New Generation CuisineNew Generation Cuisine BS as at 1 AprilBS as at 1 April AssetsAssets Funds Provided Funds Provided

byby Cash in BankCash in Bank == ProprietorshipProprietorship $15,000$15,000 == $15,000$15,000

The Balance Sheet EquationThe Balance Sheet Equation

New Generation CuisineNew Generation Cuisine BS as at 2 AprilBS as at 2 April AssetsAssets Funds Provided byFunds Provided by Cash in BankCash in Bank 2,0002,000 CapitalCapital 15,00015,000 Kitchen EquipKitchen Equip 8,0008,000 FurnitureFurniture 5,0005,000 TotalTotal 15,000 15,000 15,000 15,000

The Balance Sheet EquationThe Balance Sheet Equation

New Generation CuisineNew Generation Cuisine BS as at 10 AprilBS as at 10 April AssetsAssets Funds Provided byFunds Provided by Cash in BankCash in Bank 20002000 Capital Capital 15,000 15,000 Kitchen EquipKitchen Equip 8,0008,000 FurnitureFurniture 5,0005,000 LiabilitiesLiabilities Stock on HandStock on Hand 3,0003,000 Bank o/draft 3000Bank o/draft 3000

TotalTotal 18,00018,000 18,000 18,000

The Balance Sheet EquationThe Balance Sheet Equation

AssetsAssets– Current AssetsCurrent Assets– Fixed AssetsFixed Assets– Non Current AssetsNon Current Assets

LiabilitiesLiabilities

- Current Liabilities- Current Liabilities

- Non Current Liabilities- Non Current Liabilities