Finance & Accounting

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Hospitality Accounting Overview

Hospitality business operations, as well as others, are generally identified as having a number of different cyclical sales revenue cycles. First, there is the daily operating cycle that applies particularly to restaurant operations where daily sales revenue typically depends on meal periods. Second, there is a weekly cycle. On the one hand, business travelers normally use hotels, motels, and other hospitality operations during the week and generally provide little weekend hospitality business.


The controller is the internal accountant of a hotel. He or she is responsible for the
actual and effective administration of financial data produced on a daily basis in the hotel.
In the lodging property, daily financial status must be available to corporate owners,
management, and guests. This requires a well-organized staff, not only to prepare oper-
ating statistics but also to assist the general manager in determining the effectiveness of
each department manager. Often the general manager relies on the controller to provide

Cash Versus accrual accounting

The cash and accrual basis are the two methods of accounting. The difference between the two methods is how and when sales revenue and expenses are recognized. The cash basis of accounting recognizes sales revenue inflows when cash is received and operating expense outflows to generate sales revenue when cash is paid. Simply put, the cash basis recognizes sales revenue and operating expenses only when cash changes hands.


In a hospitality operation, some information is used for more than one purpose.
The name of a guest registering in a hotel is an example of information that
might be used for room reservation, registration, guest history, housekeeping,
and accounting purposes. Similarly, the name of a food item might be used for
receiving, storing, issuing, recipes, production, inventory, and sales control.
With a computer system it is feasible, sensible, and advantageous to use
software that is integrated. In integrated software systems, the objective is to

Balance sheets and income statements

The balance sheet reveals the financial condition of a business entity by showing the status of its assets, liabilities, and ownership equities on the specific ending date of an operating period. The income statement reports the economic results of the business entity by matching sales revenue inflows, and expense outflows to show the results of operations—net income or net loss. The income statement is generally considered the more important of the two major financial reports.


The question sometimes arises whether it is better to have software specifically
written for an individual hospitality operation’s needs or to buy an alreadywritten
software package (known as canned software). Specifically, custom software
is far more expensive than canned programs. Also, most hospitality businesses
are generally small operations that do not have the resources necessary
to carry out a system analysis and undertake the design work necessary to develop
their own computer software.
Canned programs normally have been widely tested, and any errors (bugs

Balance sheet

The balance sheet is a statement showing a business’s financial position at the end of an accounting
period. It portrays the financial position of the organization at a particular point in time.
The balance sheet lists all the assets, liabilities,and owner’s equity of an entity as of a specific
date. It is classified into major groupings of assets and liabilities in order to facilitate analysis, for
example, current assets, fixed assets, current liabilities,non-current liabilities. The balance sheet

Generally Accepted Accounting Principles (1)

Accounting is not a static system; it is a dynamic process that incorporates generally accepted accounting principles (GAAP) that evolve to suit the needs of financial statement readers, such as business managers, equity owners, creditors, and governmental agencies with meaningful, dependable information. The general principles and concepts discussed in this text will include business entity, monetary unit, going concern, cost, time period, conservatism, consistency, materiality, full disclosure, objectivity, and matching principle.