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37 Cards in this Set
- Front
- Back
Characteristics of the Hospitality Industry
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-Short distribution chain
-Seasonal in Nature -Major Investment -Labor Intensive -Utilizes a uniform system of accounts |
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Generally accepted accounting Principles
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-Cost
-Business Entity -Going Concern -Unit of Measurement -Objective Evidence -Full Disclosure -Consistency -Matching -Conservatism -Materiality (office Supplies |
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Cash Basis & Accrual Basis accounting
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CB: Recognizes accounting transactions at the point of cash inflow or out flow
AB: Recognizes revenues when earned and expense when incurred |
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(6) Branches of Accounting
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1.Finacial
2. Cost 3. Managerial 4. Tax 5. Auditing 6. Accounting Systems |
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Fundamental Accounting Equation
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Assets= Liabilities+ Owners Equity
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Basic forms of business
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1. Sole Proprietorship
2. Partnership 3. Limited partnership 4. Corporation |
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Chpt 2
Purpose of the Balance Sheet |
-Reflects finacial position as of a given date
-shows balance between assets and claims to assets by others -revels the liquidity of or operation -is prepared at the end of each accounting period |
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Limitations of the balance sheet
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-Current values of some assets are not reflected
-Some valuable elements are not shown -shows financial status for one moment in time -some amounts are estimated |
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Elements of a balance sheet
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Asset- Current: Cash, Receivables, inventories, property/land, equipment, other
Liabilities: Current (payroll), Long-Term -Owners Equity |
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Balance Sheet Interpretations
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-Horizontal Analysis: absolute and relative changes
-Comparative Balance Sheet -Vertical: each line item as a % - Common-Size Balance Sheet -Base year comparisons |
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Liquidity
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the ability of an operation to meet its short-term obligations by maintaining sufficient cash and/or investments easily convertible cash.
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Contents of a Income Statement
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Revenues: Food, Beverage, rooms & rentals
Expenses: Labor, Cost of goods sold, use of assets to produce products Gains: Incidental Transactions Losses: Incidental Transactions |
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Internal users and external users
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Internal: Income statement with supplement schedule
External: summary income statements |
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The uniform system of accounts
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1st section: Operated Departments
2nd Section: Undistributed operation expenses 3rd Section: Management fees, fixed charges, gains or losses, income tax |
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Profit centers and service centers
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PC: Revenues, Cost of Sales, Labor expense, other expense
SC: Admin & Gen, HR, Utilitym Marketing, Oper & Maint, Transportation |
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Income statement interpretations
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Horizontal Analysis, Vertical Analysis, Comparative income statements, Base-Year comparisons
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Use of Footnotes in balance sheets
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-Full Disclosure principal
-Accounting Method changes -Contingent Liability(lawsuit against co.) -Unusual Items |
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Purposes of the statement of cash flows
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-Effects on cash of a business
-Provides relevant info regarding cash receipts and disbursements -Enables management to make assessments |
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Three activity areas found in cash flow statements
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Operating activities, Investing activities and financing activities
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Methods of converting income statement to cash flow statements
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Direct Method: Cash recipets from sales, Cash disbursement for expenses, expenses involving non-cash items ignored
Indirect Method: Adjust net income for non-cash items, present cash flows by activity |
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Issues pertaining to statement of cash flows
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1.SCF not analyzed by itself
2.Management focus on operations and resources 3. SCF is relatively new 4. Common-sized SCF may be useless 5. Changes |
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T/F
The largest expense category of the average lodging operation is generally payroll and related expenses |
T
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T/F
The cost principal dictates that an expenditure for equipment be recorded as a fixed asset rather than as an expense. |
False
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T/F
The Balance sheet reveals the liquidity of a business. |
True
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T/F
Revenue accounts normally have credit balances. |
True
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T/F
A limited partnership is a form of business organization in which all partners have limited liability for the debts of the business. |
False
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T/F
Liabilities to be paid within on year should be classified as current |
True
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T/F
In most cases the balance sheet remains up to date for several months after the balance sheet date. |
False
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T/F
Current assets are normally listed on the balance sheet in the order of their importance to the business |
False
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The principal of full disclosure dictates that footnotes be included in the financial statement presentation of a hospitality business.
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True
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A Hotel's paid occupancy percentage is consistent from day to day, fluctuating only in the long term.
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False
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T/F
Income statements for external users are often called summary income statements |
True
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T/F
A Uniform system of accounts is a standardized accounting system designed specifically for use in multi-unit operations |
False
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T/F
A uniform system of accounts can be adopted for use by Large and Small hospitality operations |
True
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T/F
An operated department schedule always includes both Revenues and Direct expenses |
True
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T/F
The difference between a profits enters Revenues & Centers Revenue and direct expense is referred to as departmental income |
True
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T/F
A gain on a sale of property and equipment is determined by subtracting the accumulated depreciation of the item sold from the proceeds. |
False
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