Hospitality Industry Managerial Accounting

Syllabus

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Chapter 1: Introduction to Managerial Accounting

1. Overview of the Hospitality Industry
   a. Seasonality of Business
   b. Short Distribution Chain and Time Span
   c. A Labor-Intensive Industry
   d. Major Investment in Fixed Assets
2. The Accounting Function in the Hospitality Industry
   a. Uniform Systems of Accounts
3. Principles of Accounting
   a. The Cost Principle
   b. Business Entity
   c. Continuity of the Business Unit (Going Concern)
   d. Unit of Measurement
   e. Objective Evidence
   f. Full Disclosure
   g. Consistency
   h. Matching
   i. Conservatism
   j. Materiality
   k. Revenue Recognition
   l. Cash Versus Accrual Accounting
4. Branches of Accounting
5. Review of Accounting Mechanics
   a. Debit and Credit
6. The Accounting Cycle
7. Forms of Business Organization International Financial Reporting Standards Ethics and Hospitality Accounting

Chapter 2: The Balance Sheet

1. Purposes of the Balance Sheet
2. Limitations of the Balance Sheet
3. Balance Sheet Formats
4. Content of the Balance Sheet
   a. Current Accounts
   b. Non current Receivables
   c. Investments
   d. Property and Equipment
   e. Other Assets
   f. Long-Term Liabilities
   g. Owners’ Equity
   h. Footnotes
   i. Consolidated Financial Statements
5. Balance Sheet Analysis
   a. Horizontal Analysis
   b. Vertical Analysis
   c. Base-Year Comparisons
6. Appendix: Consolidated Financial Statements and Sample Notes

Chapter 3: The Income Statement

1. Major Elements of the Income Statement
2. Relationship with the Balance Sheet
3. Income Statements for Internal and External Users
4. Uniform Systems of Accounts
5. Approach to Hospitality Industry Income Statements
6. Summary Operating Statement
7. Contents of the Income Statement
8. Departmental Statements
9. Lodging Industry Operating Statistics
10. Analysis of Income Statements
11. USAR and USFRC
12. Appendix: Uniform System Schedules

Chapter 4: The Statement of Cash Flows

1. The Purpose of the Statement of Cash Flows
   a. The SCF in Relation to Other Financial Statements
2. Classification of Cash Flows
3. Conversion of Accrual Income to Net Cash Flows from Operations
   a. Direct and Indirect Methods
4. Preparing the SCF
   a. Step 1: Net Cash Flows from Operating Activities
   b. Step 2: Net Cash Flows from Investing Activities
   c. Step 3: Net Cash Flows from Financing Activities
   d. Step 4: Presenting Cash Flows by Activity
5. A Comprehensive Illustration Interpreting the Results
6. Analysis of Statements of Cash Flows

Chapter 5: Ratio Analysis

1. Ratio Standards
2. Purposes of Ratio Analysis
3. What Ratios Express
4. Classes of Ratios
5. Liquidity Ratios
   a. Current Ratio
   b. Acid-Test Ratio
   c. Operating Cash Flows to Current Liabilities Ratio
   d. Accounts Receivable Turnover
   e. Average Collection Period
   f. Working Capital Turnover Ratio
6. Solvency Ratios
   a. Solvency Ratio
   b. Debt-Equity Ratio
   c. Long-Term Debt to Total Capitalization Ratio
   d. Number of Times Interest Earned Ratio
   e. Fixed Charge Coverage Ratio
   f. Debt Service Coverage Ratio
   g. Operating Cash Flows to Total Liabilities Ratio
7. Activity Ratios
   a. Inventory Turnover
   b. Property and Equipment Turnover
   c. Asset Turnover
   d. Paid Occupancy Percentage
   e. Complimentary Occupancy
   f. Average Occupancy per Room
   g. Multiple Occupancy
   h. Seat Turnover
8. Profitability Ratios
   a. Profit Margin
   b. Operating Efficiency Ratio
   c. Gross Operating Profit per Available Room
   d. EBITDA Margin Ratio
   e. EBITDA per Available Room
   f. Return on Assets
   g. Gross Return on Assets
   h. Return on Owners’Equity
   i. Return on Common Stockholders’Equity
   j. Earnings per Share
   k. Price/Earnings Ratio
   l. Viewpoints Regarding Profitability Ratios
   m. Profitability Evaluation of Segments
9. Operating Ratios
   a. Mix of Sales
   b. Average Room Rate
   c. Revenue per Available Room
   d. Revenue per Available Customer
   e. Average Food Service Check
   f. Food Cost Percentage
   g. Beverage Cost Percentage
   h. Labor Cost Percentage
10. Limitations of Ratio Analysis
11. Usefulness of Financial Ratios

Chapter 6: Basic Cost Concepts

1. General Nature of Cost
2. Costs in Relation to Sales Volume
   a. Fixed Costs
   b. Variable Costs
   c. Step Costs
   d. Mixed Costs
   e. Total Costs
3. Determination of Mixed Cost Elements
   a. High/Low Two-Point Method
   b. Scatter Diagram
   c. Regression Analysis
   d. Evaluation of the Results
4. Fixed Versus Variable Costs
5. Direct and Indirect Costs
6. Overhead Costs
   a. Allocation of Overhead Costs
   b. After Cost Allocation
7. Controllable Costs
8. Differential Costs
9. Relevant Costs
10. Sunk Costs
11. Opportunity Costs
12. Average and Incremental Costs
13. Standard Costs
14. Decision-Making Situations
15. Illustration of Relevant Costs in Management Decisions
16. Appendix: Should Overhead Costs Be Allocated?

Chapter 7: Cost-Volume-Profit Analysis

1. CVP Analysis Defined
   a. CVP Assumptions, Limitations, and Relationships
2. CVP Equation—Single Product
   a. CVP Illustration—Single Product
   b. Margin of Safety
   c. Sensitivity Analysis
3. CVP Equation—Multiple Products
   a. CVP Illustration—Multiple Products
   b. Additional Questions and Solutions
4. Income Taxes and CVP Analysis
5. Profit-Volume Graphs
6. Cash Flow CVP Analysis
7. Comprehensive Problem
8. Operating Leverage

Chapter 8: Cost Approaches to Pricing

1. The Importance of Pricing
2. Price Elasticity of Demand
3. Informal Pricing Approaches
4. Cost Approaches: Four Modifying Factors
5. Markup Approaches to Pricing
6. Pricing Rooms
   a. $1 per $1,000 Approach
   b. Hubbart Formula
   c. Illustration of the Hubbart Formula
7. Discounting Room Rates
8. Revenue Management and Dynamic Pricing
   a. Measuring Revenue Management Yield
9. Bottom-Up Approach to Pricing Meals
10. Food Sales Mix and Gross Profit
11. Menu Engineering
12. Integrated Pricing

Chapter 9: Forecasting Methods

1. Implicit Versus Explicit Forecasts
2. Forecasting in the Hospitality Industry
3. Personnel Responsible for Forecasting
4. The Nature of Forecasting
5. Underlying Pattern of the Data
6. Overview of Forecasting Methods
   a. Naïve Methods
   b. Moving Averages
   c. Exponential Smoothing
   d. Causal Forecasting Approaches
   e. Limitations of Quantitative Forecasting Methods
   f. Qualitative Forecasting Techniques
7. Selection of a Forecasting Method
8. Short-Term Forecasts in the Lodging Industry
9. Forecasting Methods in the Club Industry
10. Forecasting Cases
    a. ARAMARK Corporation—Forecasting by Food Service Directors
    b. Panda Express—A Case in Forecasting
    c. Forecasting at Hilton Worldwide

Chapter 10: Operations Budgeting

1. Types of Budgets
2. Budgeting Horizons
3. Reasons for Budgeting
4. Personnel Responsible for Budget Preparation
5. The Budget Preparation Process
   a. Forecasting Revenue
   b. Estimating Expenses
   c. Projecting Fixed Charges and Interest Expense
   d. Budget Formulation Illustrated
   e. Flexible Budgets
   f. Budgeting for a New Lodging Property
6. Budgetary Control
7. Determination of Variances
8. Determination of Significant Variances
9. Variance Analysis
   a. Revenue Variance Analysis
   b. Cost of Goods Sold Analysis
   c. Variable Labor Variance Analysis
   d. Variance Analysis of Sands Motel’s Significant Variances
10. Determination of Problems and Management Action
11. Re-forecasting
    a. Re-forecasting at The Sheraton Corporation
12. Budgeting at Multi-Unit Hospitality Enterprises
13. Budgeting at Lodging Properties

Chapter 11: Cash Management

1. Cash and Its Importance
2. Cash Conversion Cycle
3. Distinction Between Income and Cash Flows
4. Cash Budgeting
   a. Cash Receipts and Disbursements Approach
   b. Adjusted Net Income Approach
   c. Information for Cash Budgeting
   d. Illustration—Cash Receipts and Disbursements Approach
   e. Illustration—Adjusted Net Income Approach
5. Float
6. Cash Flow Information
   a. Enhancing Cash Flows
7. Management of Working Capital
8. Accounts Receivable
9. Inventory
10. Current Liabilities
11. Gift Card Accounting
12. Unsecured Bank Loans
13. Integrated Cash Management for Multi-Unit Operations

Chapter 12: Internal Control

1. Conditions for Fraud and Embezzlement
2. The Hospitality Industry’s Vulnerability to Theft
3. Definition and Objectives of Internal Control
4. Characteristics of Internal Control
   a. Management Leadership
   b. Organizational Structure                                                             
   c. Sound Practices
   d. Fixed Responsibility
   e. Competent and Trustworthy Personnel
   f. Segregation of Duties
   g. Authorization Procedures
   h. Adequate Records
   i. Procedure Manuals
   j. Physical Controls
   k. Budgets and Internal Reports
   l. Independent Performance Checks
5. Internal Auditing
6. Basics of Internal Accounting Control
   a. Cash Control
   b. Accounts Receivable
   c. Accounts Payable
   d. Purchasing and Receiving
   e. Payroll
   f. Inventories
   g. Fixed Assets
   h. Marketable Securities
7. Implementation and Review of Internal Controls
8. The Sarbanes-Oxley Act of 2002
9. Internal Control in Small Operations
10. Additional Classification of Controls
11. Codes of Ethics

Chapter 13: Capital Budgeting

1. Capital Expenditures and Cap Ex 2014
2. Relationship of Capital Budget to Operations Budget
3. Types of Capital Budgeting Decisions
4. Time Value of Money
5. Cash Flow in Capital Budgeting
6. Capital Budgeting Models
   a. Accounting Rate of Return
   b. Payback
   c. Net Present Value Model
   d. Internal Rate of Return
   e. Comparison of NPV and IRR Models
   f. Profitability Index
7. Mutually Exclusive Projects with Different Lives
8. Capital Rationing
9. Use of Capital Budgeting Models in the Lodging Industry

Chapter 14: Lease Accounting

1. Leases and Their Uses
   a. Advantages and Disadvantages of Leases
   b. Provisions of Lease Contracts
2. Lease Accounting
   a. Classification of Leases
   b. Accounting for Operating Leases
   c. Accounting for Capital Leases
   d. Illustration of Accounting for Capital Leases
3. Leasehold Improvements
4. Sale and Leasebacks
5. Leases and Their Effect on Financial Ratios
6. Choosing to Buy or Lease
   a. Calculating the Options
   b. Sample Application

Chapter 15: Income Taxes

1. Tax Considerations in Economic Decisions
2. History and Objectives of Federal Income Taxes
3. Tax Basics
   a. Income, Income Exclusions, and Adjustments
   b. Deductions, Exemptions, and Taxable Income
   c. Taxes and Credits
   d. A Tax Illustration
4. Tax Avoidance
5. Forms of Business Organization
   a. Sole Proprietorship
   b. Partnerships
   c. Limited Partnerships
   d. Limited Liability Companies
   e. Corporations
   f. S Corporations
6. Minimizing Taxes
7. Accounting Methods
   a. Cash Method Versus Accrual Method
   b. Installment Sales Method
8. Accounting Income Versus Taxable Income
   a. Accelerated Depreciation
   b. Pre-Opening Expenses
   c. First-Year Losses
   d. Loss Carry backs and Carry forwards
9. State and Municipal Taxes
10. Property Taxes