Curs 2 Accounting department

The internal finances of a hotel are monitored. by the accounting department. The extent of the
functions that the accounting staff engages in is dependent principally on the size and complexity of the
operation and the cost-effectiveness of retaining outside services Smaller properties often relv on an
internal office staff to handle tasks like payroll or have staff download the hotel data from their computers
to be transmitted off site for processing. Such a hotel will contract outside accounting firms to generate
more sophisticate reports like operating statements and operational analysis as well as provide traditional
functions like periodic audits. Daily functions like nights audits, bank deposits, and credit checks are
handled internally by the hotel's accounting department or in smaller properties by the front office staff.
Larger properties will have an entire accounting division designed ,to monitor the accounting systems,
generate cost control reports, .and conduct departmental audits.
Accounting may be defined as the process of identifying, recording, classifying, summarizing,
and communicating financial information about an economic entity to decision makers interested in
making informed judgments and decisions. Accounting is based on principles and concepts that are broad
rules that have been developed by accountants for recording and reporting on the financial statements .
These rules have evolved to suit the needs of financial statement readers such as the company's
management the owners, the creditors, and government agencies. The rules make the statements more
meaningful and dependable. These rules include : 1) the business entity concept; 2) the going concern
principle; 3) the money concept; 4) the cost principle; 5) the periodicity concept; 6) the matching
principle; 7) the full-disclosure principle; 8) the consistency concept; 9) conservatism concept; 10) the
materiality concept; 11) the objectivity concept.
Financial events that must be recorded are first identified: - accounts receivable; - accounts
payable; - payroll; - food and beverage control; - cash management.
The process of recording entails entering the information into financial records. Most business
today use computers for recording this information. In the past large manuals, called journals were used
for hand-written journal entries.
The activity recorded is classified. Here are the major classifications and a brief description of
each :
- Revenues (often called sales) - Inflow of cash or promises to pay in exchange for goods
or services rendered. They also include interest income. (ex. room sales and food
beverages sales)
- Expenses- Outflow of cash or promise to pay in exchange for goods or services rendered.
(wages expenses, utilities expenses, telephone expenses)
- Assets- Resources owned by the economic entity ( cash accounts receivable and
equipment)
- Liabilities – Obligations owed by the economic entity to creditors (wages payable, taxes
payable, and mortgage payable)
- Owner`s equity – The residual value of the assets over liabilities that have been paid and
belong to the owners
SEVERAL BUSINESS ACTIVITIES THAT MUST BE RECORDED AND CLASSIFIED
ACTIVITY MAJOR CLASSIFICATIONS AFFECTED
SALES – a hotel guest buys lunch on account ASSETS- a promise (from guest) to pay (the
hotel ) is received
REVENUE- future inflow of cash
PURCHASES – the hotel purchases food on ASSETS – food is obtained
account LIABILITIES – an obligation to pay in the
future
CASH DISBURSEMENTS – the hotel pays EXPENSES – an outflow of cash
its telephone bill ASSETS – resources are reduced
 CASH RECEIPTS – a hotel guest checks-out
and pays her bill
PAYROLL – employees are paid wages for
the week
ASSETS – cash is received
ASSETS – a promise to pay by the guest is
satisfied
EXPENSES – cash is paid
ASSETS – resources are reduced

Hundred and even thousands of economic events are identified and recorded and classified as
above the entity` s books every day. Periodically the results of these activities are summarized in daily
orts (e.g. the manager` s daily report prepared daily, generally by the accounting office to indicate the
day` s key business operating statistics, such as rooms occupancy percent and average food check meal
period) or in monthly or yearly Financial Statements which represents a communication cedure both with
decision makers within the economic entity and with external parties.
There are 3 financial statements which reflect the results of activities:
- The INCOME STATEMENT – reporting revenue and expenses
- The statement OF CASH FLOW – reporting both cash received and disbursed
- The BALANCE SHEET – reporting assets, liabilities and owner` s equity.
INCOME STATEMENT – are highly condensed when prepared for external parties so as to
retain confidentiality of operating details, and quite detailed when prepared for decision makers within the
economic entity. In this latter case they will include a detailed schedule for each operating department
(the rooms department, food department, etc.)
THE BALANCE SHEET – shows the financial position of a company at a point in time
The difference between assets and liabilities equals owners` equity. The assets are subdivided
between current and property and equipment. Liabilities are divided between current and long – term.
Owners` equity reflects the owners claims to assets.
THE STATEMENT OF CASH FLOWS
The key to a successful hospitality financial system is the communicating of relevant economic
information to decision makers. Though it involves forms, reports, computers, software and more. The
prime ingredient is people. The bookkeepers, accountants and other financial experts make this system
successful.