Hospitality Financial Accounting

by Jerry J. Weygandt (Univ. of Wisconsin); Donald E. Kieso (Emeritus, Northern Illinois Univ.); Paul D. Kimmel (Univ. of Wisconsin-Milwaukee); Agnes L. DeFranco (Univ. of Houston)

• ISBN13: 9780471270553
• ISBN10: 0471270555
• Format: Hardcover
• Copyright: 2004-03-01
• Publisher: Wiley

Summary

"As the hospitality field continues to grow and diversify, today's hospitality professionals need to understand financial accounting at a higher level than ever before. Written by some of the most respected authors in accounting, Hospitality Financial Accounting, Second Edition gives a complete introduction to financial accounting principles and demonstrates how to apply them to all facets of the hospitality industry." "Updated with the latest developments in the accounting and hospitality fields, Hospitality Financial Accounting, Second Edition covers the basics of financial accounting and then shows readers how to analyze statements and deal with the daily issues they will face on the job."--BOOK JACKET.

Author Biography

<b>JERRY J. WEYGANDT, PhD, CPA,</b> is the Authur Andersen Alumni Professor of Accounting at the University of Wisconsin&#8212;Madison. <p> <b>DONALD E. KIESO, PhD, CPA,</b> is the KPMG Emeritus Professor of Accounting at Northern Illinois University. <p> <b>PAUL D. KIMMEL, PhD, CPA,</b> is Associate Professor of Accounting at the University of Wisconsin&#8212;Milwaukee. <p> <b>AGNES L. DeFRANCO, EdD, CHE, CHAE,</b> is Associate Professor of the Conrad N. Hilton School of Hotel and Restaurant Management at the University of Houston.

Table of Contents

Hospitality Accounting In Action	1	(33)
Feature story: From a Bank to a Hotel	1	(1)
What Is Accounting?	2	(5)
Who Uses Accounting Data	3	(2)
Brief History of Accounting	5	(1)
Distinguishing Between Bookkeeping and Accounting	6	(1)
Accounting and You	6	(1)
The Building Blocks of Accounting	7	(7)
Ethics---A Fundamental Business Concept	8	(1)
Generally Accepted Accounting Principles	8	(1)
Assumptions	9	(2)
Basic Accounting Equation	11	(3)
Using the Building Blocks	14	(7)
Transaction Analysis	15	(4)
Summary of Transactions	19	(2)
Financial Statements	21	(6)
Income Statement	21	(1)
Retained Earnings Statement	21	(2)
Balance Sheet	23	(1)
Statement of Cash Flows	23	(4)
Appendix The Accounting Profession	27	(7)
Public Accounting	28	(1)
Private Accounting	28	(1)
Not-for-Profit Accounting	28	(6)
Accounting Principles	34	(40)
Feature story: Certainly Worth Investigating!	35	(1)
The Conceptual Framework of Accounting	36	(4)
Objectives of Financial Reporting	37	(1)
Qualitative Characteristics of Accounting Information	38	(1)
Elements of Financial Statements	39	(1)
Operating Guidelines	40	(1)
Assumptions	40	(1)
Monetary Unit Assumption	41	(1)
Economic Entity Assumption	41	(1)
Time Period Assumption	41	(1)
Going Concern Assumption	41	(1)
Principles	41	(4)
Revenue Recognition Principle	42	(1)
Matching Principle (Expense Recognition)	42	(2)
Full Disclosure Principle	44	(1)
Cost Principle	44	(1)
Constraints in Accounting	45	(2)
Materiality	46	(1)
Conservatism	46	(1)
Summary of Conceptual Framework	46	(1)
Statement Presentation and Analysis	47	(8)
Classified Balance Sheet	47	(1)
Classified Income Statement	48	(2)
Analyzing Financial Statements	50	(4)
Financial Statement Presentation---An International Perspective	54	(1)
The Uniform System of Accounts and Financial Reporting	55	(2)
Lodging Industry	56	(1)
Foodservice Industry	56	(1)
Club Industry	56	(1)
Gaming Industry	56	(1)
Accounting and Financial Management in Hospitality	57	(17)
Hotel Operations	57	(3)
Hotel Accounting Department Organization	60	(2)
Foodservice Operations	62	(1)
Club Operations	63	(11)
The Recording Process	74	(36)
Feature story: No Such Thing As a Perfect World	75	(1)
The Account	76	(6)
Debits and Credits	77	(1)
Debit and Credit Procedures	77	(3)
Stockholders' Equity Relationships	80	(1)
Expansion of the Basic Equation	81	(1)
Steps in the Recording Process	82	(7)
The Journal	83	(2)
The Ledger	85	(4)
The Recording Process Illustrated	89	(8)
The Trial Balance	97	(2)
Limitations of a Trial Balance	98	(1)
Locating Errors	98	(1)
Use of Dollar Signs	99	(1)
Electronic Data Processing	99	(11)
Comparative Advantages of Manual versus Computerized Systems	99	(1)
A Look into the Future	100	(10)
Adjusting the Accounts	110	(32)
Feature story: Timing Is Everything	111	(1)
Timing Issues	112	(3)
Selecting an Accounting Time Period	113	(1)
Fiscal and Calendar Years	113	(1)
Accrual- vs. Cash-Basis Accounting	113	(1)
Recognizing Revenues and Expenses	114	(1)
The Basics of Adjusting Entries	115	(15)
Types of Adjusting Entries	116	(1)
Adjusting Entries for Prepayments	116	(7)
Adjusting Entries for Accruals	123	(5)
Summary of Basic Relationships	128	(2)
The Adjusted Trial Balance and Financial Statements	130	(2)
Preparing the Adjusted Trial Balance	130	(1)
Preparing Financial Statements	131	(1)
Alternative Treatment of Prepaid Expenses and Unearned Revenues	132	(10)
Prepaid Expenses	133	(1)
Unearned Revenues	134	(1)
Summary of Additional Adjustment Relationships	135	(7)
Completion of the Accounting Cycle	142	(32)
Feature story: Everyone Likes to Win	143	(1)
Using a Work Sheet	144	(6)
Steps in Preparing a Work Sheet	145	(2)
Preparing Financial Statements from a Work Sheet	147	(3)
Preparing Adjusting Entries from a Work Sheet	150	(1)
Closing the Books	150	(6)
Preparing Closing Entries	151	(1)
Closing Entries, Illustrated	152	(1)
Posting of Closing Entries	153	(2)
Preparing a Post-Closing Trial Balance	155	(1)
Summary of the Accounting Cycle	156	(2)
Correcting Entries---An Avoidable Step	158	(3)
Classified Balance Sheet	161	(13)
Standard Classifications	161	(4)
Classified Balance Sheet, Illustrated	165	(9)
Subsudiary Ledgers and Special Journals	174	(24)
Feature story: Different Roads for Different Folks	175	(1)
Expanding the Ledger---Subsidiary Ledgers	176	(3)
Nature and Purpose of Subsidiary Ledgers	176	(1)
Example	177	(1)
Advantages of Subsidiary Ledgers	178	(1)
Expanding the Journal---Special Journals	179	(1)
Sales Journal	180	(2)
Journalizing Credit Sales	180	(1)
Posting the Sales Journal	180	(2)
Proving the Ledgers	182	(1)
Advantages of the Sales Journal	182	(1)
Cash Receipts Journal	182	(5)
Journalizing Cash Receipts Transactions	184	(1)
Posting the Cash Receipts Journal	185	(1)
Proving the Ledgers	185	(2)
Purchases Journal	187	(1)
Journalizing Credit Purchases of Merchandise	187	(1)
Posting the Purchases Journal	187	(1)
Expanding the Purchases Journal	188	(1)
Cash Payments Journal	188	(2)
Journalizing Cash Payments Transactions	188	(2)
Posting the Cash Payments Journal	190	(1)
Effects of Special Journals on General Journal	190	(8)
Accounting for Merchandising Operations in Hospitality	198	(26)
Feature story: Pricing for Profitable Margins	199	(1)
Merchandising Operations	200	(3)
Operating Cycles	201	(1)
Inventory Systems	202	(1)
Recording Purchases of Merchandise	203	(5)
Purchase Returns and Allowances	205	(1)
Freight Costs	206	(1)
Purchase Discounts	206	(2)
Recording Sales of Merchandise	208	(3)
Sales Returns and Allowances	209	(1)
Sales Discounts	210	(1)
Completing the Accounting Cycle	211	(2)
Adjusting Entries	211	(1)
Closing Entries	212	(1)
Summary of Merchandising Entries	212	(1)
Work Sheet for a Merchandiser	213	(11)
Using a Work Sheet	213	(11)
Financial Statements	224	(48)
Feature story: Cash Is King	225	(1)
The Income Statement	226	(7)
Multiple-Step Income Statement	226	(4)
Single-Step Income Statement	230	(1)
Departmental Income Statement	230	(1)
Consolidated Income Statement	231	(1)
Classified Balance Sheet	232	(1)
The Statement of Cash Flows: Purpose and Format	233	(7)
Purpose of the Statement of Cash Flows	233	(1)
Meaning of Cash Flows	234	(1)
Classification of Cash Flows	234	(1)
Significant Noncash Activities	235	(1)
Format of the Statement of Cash Flows	236	(1)
Usefulness of the Statement of Cash Flows	237	(1)
Preparing the Statement of Cash Flows	238	(1)
Indirect and Direct Methods	238	(2)
Section 1: Indirect Method for Statement of Cash Flows	240	(11)
First Year of Operations---2004	240	(4)
Second Year of Operations---2005	244	(7)
Section 2: Direct Method for Statement of Cash Flows	251	(21)
First Year of Operations---2004	251	(7)
Second Year of Operations---2005	258	(14)
Payroll	272	(26)
Feature story: Payroll: The Important Cost in the Service Industry	273	(1)
Payroll Defined	274	(1)
Internal Control of Payroll	274	(4)
Hiring Employees	275	(1)
Timekeeping	275	(1)
Preparing the Payroll	276	(1)
Paying the Payroll	276	(1)
Fair Labor Standards Act	277	(1)
Determining the Payroll	278	(4)
Gross Earnings	278	(1)
Payroll Deductions	279	(2)
Net Pay	281	(1)
Recording the Payroll	282	(6)
Maintaining Payroll Department Records	282	(1)
Recognizing Payroll Expenses and Liabilities	283	(1)
Recording Payment of the Payroll	284	(1)
Tipped Employees	285	(1)
Tip Reporting	285	(3)
Employer Payroll Taxes	288	(10)
FICA Taxes	288	(1)
Federal Unemployment Taxes	289	(1)
State Unemployment Taxes	289	(1)
Recording Employer Payroll Taxes	289	(1)
Filing and Remitting Payroll Taxes	290	(8)
Inventories, Cost Calculations, and Internal Controls	298	(52)
Feature story: Minding the Money in Moose Jaw	299	(2)
Inventory Basics	301	(3)
Classifying Inventory	301	(1)
Determining Inventory Quantities	301	(2)
Inventory Accounting Systems	303	(1)
Periodic Inventory System	304	(7)
Recording Transactions	304	(1)
Recording Purchases of Merchandise	304	(2)
Recording Sales of Merchandise	306	(1)
Cost of Goods Sold	306	(1)
Determining Cost of Goods Purchased	306	(2)
Transfers In and Out	308	(1)
Food Cost Calculations	309	(1)
Beverage Cost Calculations	310	(1)
Income Statement Presentation	310	(1)
Inventory Costing Under a Periodic Inventory System	311	(1)
Using Actual Physical Flow Costing---Specific Identification	312	(7)
Using Assumed Cost Flow Methods---FIFO, LIFO, and Average Cost	312	(4)
Financial Statement Effects of Cost Flow Methods	316	(2)
Using Inventory Cost Flow Methods Consistently	318	(1)
Inventory Errors	319	(2)
Income Statement Effects	319	(2)
Balance Sheet Effects	321	(1)
Statement Presentation and Analysis	321	(1)
Presentation	321	(1)
Analysis	321	(1)
Internal Control	322	(6)
Principles of Internal Control	323	(4)
Limitations of Internal Control	327	(1)
Cash Controls	328	(6)
Internal Control over Cash Receipts	329	(3)
Internal Control over Cash Disbursements	332	(2)
Use of a Bank	334	(16)
Making Bank Deposits	334	(1)
Writing Checks	334	(2)
Bank Statements	336	(1)
Reconciling the Bank Account	337	(13)
Accounting for Receivables and Payables	350	(32)
Feature story: Show Me the Money	351	(1)
Accounts Receivable	352	(12)
Types of Receivables	352	(1)
Recognizing Accounts Receivable	353	(1)
Valuing Accounts Receivable	354	(7)
Disposing of Accounts Receivable	361	(3)
Credit Policies	364	(1)
The Credit Department	364	(1)
The Credit Policy Prior, During, and Post Event	364	(1)
City Ledger of a Hotel	365	(1)
Notes Receivable	365	(6)
Determining the Maturity Date	366	(1)
Computing Interest	367	(1)
Recognizing Notes Receivable	368	(1)
Valuing Notes Receivable	368	(1)
Disposing of Notes Receivable	368	(3)
What Is a Current Liability?	371	(11)
Notes Payable	371	(1)
Sales Tax Payable	372	(1)
Payroll and Payroll Taxes Payable	373	(1)
Unearned Revenues	374	(1)
Current Maturities of Long-Term Debt	375	(7)
Long-Term and Intangible Assets	382	(30)
Feature story: Olympic Retrofit of the Homestead Resort in Midway, Utah---February 2002	383	(1)
Long-Term Assets	384	(18)
Determining the Cost of Long-Term Assets	385	(1)
Land	385	(1)
Land Improvements	386	(1)
Buildings	386	(1)
Equipment	386	(2)
Depreciation	388	(8)
Revising Periodic Depreciation	396	(1)
Expenditures During Useful Life	397	(1)
Long-Term Asset Disposals	397	(5)
Intangible Assets	402	(10)
Patents	403	(1)
Copyright	404	(1)
Trademarks and Trade Names	404	(1)
Franchises and Licenses	404	(1)
Goodwill	405	(7)
Sole Proprietorships, Partnerships, and Corporations	412	(45)
Feature story: ``Two All Beef Patties, Special Sauce, Lettuce, Cheese, Pickles, Onions on a Sesame Seed Bun''	413	(1)
Sole Proprietorships	414	(1)
Partnerships	415	(7)
Association of Individuals	415	(1)
Mutual Agency	415	(1)
Limited Life	416	(1)
Unlimited Liability	416	(1)
Co-Ownership of Property	416	(1)
Advantages and Disadvantages of a Partnership	416	(1)
The Partnership Agreement	417	(1)
Formation of a Partnership	417	(1)
Division of Net Income or Net Loss	418	(3)
Partnership Financial Statements	421	(1)
The Corporate Form of Organization and Stock Transactions	422	(18)
Characteristics of a Corporation	422	(4)
Forming a Corporation	426	(1)
Corporate Capital	426	(5)
Accounting for Common Stock Issues	431	(3)
Accounting for Treasury Stock	434	(4)
Preferred Stock	438	(1)
Dividend Preferences	439	(1)
Cumulative Dividend	439	(1)
Dividends	440	(7)
Cash Dividends	440	(3)
Stock Dividends	443	(1)
Entries for Stock Dividends	444	(1)
Effects of Stock Dividends	445	(1)
Stock Splits	445	(2)
Retained Earnings	447	(10)
Retained Earnings Restrictions	448	(1)
Prior Period Adjustments	449	(1)
Retained Earnings Statement	449	(8)
Appendix Specimen Financial Statements: Hilton Hotels Corporation	457	(22)
Photo Credits	479	(2)
Index	481