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Hospitality
Financial
Accounting
Jerry J. Weygandt
Ph.D., C.P.A.
Arthur Andersen Alumni Professor of Accounting
University of Wisconsin
Donald E. Kieso
Ph.D., C.P.A.
KPMG Peat Marwick
Emeritus Professor of Accounting
Northern Illinois University
Paul D. Kimmel
Ph.D., C.P.A.
Associate Professor of Accounting
University of Wisconsin—Milwaukee
Agnes L. DeFranco
Ed.D., C.H.E., C.H.A.E.
Associate Professor of Hospitality
University of Houston
JOHN WILEY & SONS, INC.
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Hospitality
Financial
Accounting
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Hospitality
Financial
Accounting
Jerry J. Weygandt
Ph.D., C.P.A.
Arthur Andersen Alumni Professor of Accounting
University of Wisconsin
Donald E. Kieso
Ph.D., C.P.A.
KPMG Peat Marwick
Emeritus Professor of Accounting
Northern Illinois University
Paul D. Kimmel
Ph.D., C.P.A.
Associate Professor of Accounting
University of Wisconsin—Milwaukee
Agnes L. DeFranco
Ed.D., C.H.E., C.H.A.E.
Associate Professor of Hospitality
University of Houston
JOHN WILEY & SONS, INC.
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The specimen financial statements (the Appendix) are printed with permission of Hilton Hotels
Corporation.
The information and trademarks offered herein are the property of Hilton Hotels Corporation.
Image rights
not available
is a registered trademark of Hilton Hotels Corporation. All rights reserved. Used with
permission.
ϱ
This book is printed on acid-free paper. ᭺
Copyright © 2005 by John Wiley & Sons, Inc. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey
Published simultaneously in Canada
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form
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addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ
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Limit of Liability/Disclaimer of Warranty: While publisher and author have used their best efforts in
preparing this book, they make no representations or warranties with respect to the accuracy or
completeness of the contents of this book and specifically disclaim any implied warranties of
merchantability or fitness for a particular purpose. No warranty may be created or extended by sales
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Library of Congress Cataloging-in-Publication Data:
Hospitality financial accounting / Jerry J. Weygandt ... [et al.]
p. cm.
Includes bibliographical references and index.
ISBN 0-471-27055-5 (cloth)
1. Hospitality industry—Accounting I. Weygandt, Jerry J.
HF5686.H75H66 2003
657Ј.836—dc21
2003049737
Printed in the United States of America
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9
8
7
6
5
4
3
2
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T O
T H E
I N S T R U C T O R
With this text, we seek to create a book about the hospitality
business that makes the subject clear and fascinating to beginning students. That is our passion: to provide a link between hospitality financial accounting principles, student
learning, and the real world.
STUDENT EMPOWERMENT AND SUCCESS
In our effort to create an effective text, we surveyed the market and talked personally to instructors. We heard again and
again that the biggest challenges students face are to become
motivated to learn how to study and to manage their tasks.
We were gratified to learn that our general accounting texts
have helped empower students to meet these challenges and
have been rated highest in customer satisfaction by both instructors and students.
We have responded to these challenges by making the pedagogical framework of Hospitality Financial Accounting strong
and the presentation clear. We want to give hospitality students
the tools and the motivation they need to succeed in subsequent
accounting courses and in their future hospitality careers.
GOALS AND FEATURES OF THIS EDITION
This first edition of Hospitality Financial Accounting provides
an opportunity to offer to the hospitality discipline a textbook
that has set high standards for quality. Reviewers of Hospitality Financial Accounting comment positively on the writing
style, the use of real-world examples, pedagogical features,
and the fact that the textbook is not only about accounting
but about business as well.
The primary purpose in creating a financial accounting
textbook specifically for hospitality students was to maintain
these successful features and improve on them.
• We’ve carefully evaluated all topics regarding their suitability for and relevance to the beginning hospitality accounting course. Topics beyond the scope of the first hospitality accounting course are not included. Features and
topics relevant to today’s Internet and e-business environment are included.
• A student’s textbook should be as pedagogically effective
as possible. The Navigator, our guide to the learning
process in the book, has been well received and has proven
effective for students seeking to improve their study skills.
Action Plans, which accompany mini-demonstrations (“Do
It”) and Demonstration Problems in each chapter, help students develop their problem-solving skills.
• The book involves the student in the learning process and
ensures that the student understands the why as well as the
how. The message is consistent with the Accounting Education Change Commission recommendations, which encourage an emphasis on communication skills, critical
thinking and decision-making skills, ethics, international
accounting, and real-world emphasis.
• This book includes user-oriented material. Our reasons
were twofold: (1) to accomplish the objectives of the Accounting Education Change Commission, and (2) to
demonstrate the relevance of accounting to hospitality students. Most of the user material is in the Exercises section
of the end-of-chapter material. These learning activities are
designed to develop many skills that will be of use to students in other courses and in life after college, including financial statement analysis skills and the ability to use the
Internet. In addition, to give students the opportunity to
follow an extended real-world example, we have integrated
references to the Hilton Hotels financial statements
throughout the book, including Review It questions, ratio
presentations, and end-of-chapter assignments.
HIGHLIGHTS IN EACH CHAPTER
CHAPTER 1 Hospitality Accounting in Action
• Feature Story on Conrad Hilton and related “A Look
Back” exercise with solution
• Complete definitions of financial and managerial accounting
• An Accounting in Action (AIA) e-Business Insight on the
impact of Internet use in the hospitality industry
CHAPTER 2 Accounting Principles
• Feature Story on revenue and expense recognition and reporting
• Detailed coverage of the Uniform System of Accounts and
Financial Reporting
• AIA Business Insights on expense reporting for casinos
and profit margin expectations in hospitality businesses
CHAPTER 3 The Recording Process
• Information on electronic data processing in the preparation of managerial reports
CHAPTER 4 Adjusting the Accounts
• Discussion of accrual-basis versus cash-basis accounting at
the beginning of the chapter
• An AIA e-Business Insight on revenue from a Web-site ad
space
CHAPTER 5 Completion of the Accounting Cycle
• Feature Story on Rhino’s Foods, Inc. about educating employees on the financial health of the company as a motivational tool
• An AIA e-Business Insight on the monthly billing of a private club
CHAPTER 6 Subsidiary Ledgers and Special Journals
• Feature Story on the different managerial opportunities in
the hospitality industry
• Detailed discussion of the various journals in accounting
CHAPTER 7 Accounting for Merchandising Operations in
Hospitality
• Feature Story on how foodservice companies set prices
while maintaining a profitable margin
• Emphasis on a simplified coverage of the perpetual inventory system
• Information on how to use a worksheet
CHAPTER 8 The Statement of Cash Flows
• Feature Story “Cash Is King” emphasizing the importance
of cash to the success of a hospitality company
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vi
To the Instructor
• Detailed discussion of the direct and indirect methods of
the statement of cash flows
CHAPTER 9 Payroll
• Feature Story on the importance of service in the hospitality industry and the impact of labor cost wages to the
success of a company
• A Technology in Action focuses on payroll fraud and how
to avoid it
• Important information on the Fair Labor Standards Act
• Complete coverage on Tipped Employees and Tips Credit,
an important accounting function for service-based industries
CHAPTER 10 Inventories, Cost Calculations, and Internal
Controls
• Detailed analysis of food and beverage cost calculations
and inventories in foodservice operations
• An illustration of the effects of inventory errors on two
years’ income statements
• A Technology in Action on the importance of controls in
saving money
CHAPTER 11 Accounting for Receivables and Payables
• A discussion of credit policies and the importance of the
use of credit in the hospitality industry
CHAPTER 12 Long-Term and Intangible Assets
• Feature Story highlighting Homestead Resort and its
preparation for the 2002 Winter Olympics
• Full coverage of the four depreciation methods
• Discussion of MACRS
CHAPTER 13 Sole Proprietorships, Partnerships, and
Corporations
• Full discussion of the formation of sole proprietorships,
partnerships, and corporations, including S-corporations
APPENDIX Specimen Financial Statements
• Hilton Hotels Corporation
PEDAGOGICAL FRAMEWORK
Hospitality Financial Accounting provides tools to help students learn accounting concepts and procedures and apply
them to the real world. It places increased emphasis on the
processes students undergo as they learn.
Learning How to Use the Text
• A Student Owner’s Manual begins the text to help students
understand the value of the text’s learning aids and how to
use them.
• Chapter 1 contains notes that explain each learning aid the
first time it appears.
• Finally, The Navigator pulls all the learning aids together
into a learning system designed to guide students through
each chapter and help them succeed in learning the material. It consists of (1) a checklist at the beginning of the
chapter, which outlines text features and study skills they
will need, and (2) a series of check boxes that prompt students to use the learning aids in the chapter and set priorities as they study. At the end of the chapter, students are
T H E N AV I GAT OR
✓
• Understand Concepts for Review
❑
• Read Feature Story
❑
• Scan Study Objectives
❑
• Read Preview
❑
• Read text and answer Before You Go On
p. 40 ❑ p. 47 ❑ p. 64 ❑
• Work Demonstration Problem
❑
• Review Summary of Study Objectives
❑
• Complete Assignments
❑
reminded to return to The Navigator to check off their
completed work. An example of The Navigator is above.
Understanding the Context
• Concepts for Review, listed at the beginning of each chapter, identify concepts that will apply in the chapter to come.
In this way, students see the relevance to the current chapter of concepts covered earlier.
• The Feature Story helps students picture how the chapter
topic relates to the real world of accounting and business.
It serves as a running example in the chapter and is the
topic of a series of review questions call A Look Back at
Our Feature Story, toward the end of the chapter.
• Study Objectives form a learning framework throughout
the text, with each objective repeated in the margin at the
appropriate place in the main body of the chapter and again
in the Summary. Further, end-of-chapter assignment materials are linked to the Study Objectives.
• A chapter Preview links the chapter-opening Feature Story
to the major topics of the chapter. First, an introductory
paragraph explains how the Feature Story relates to the
topic to be discussed, and then a graphic outline of the
chapter provides a “visual road map” useful for seeing the
big picture, as well as the connections between subtopics.
Learning the Material
• Financial statements appear regularly throughout the
book. Often, numbers or categories are highlighted in colored type to draw attention to key information.
• Key ratios, using data from Hilton Hotels Corporation
2001 Annual Report, are examined in appropriate spots
throughout the text. Integration of ratios enables students
to see in a single presentation two important pieces of information about financial data: how they are presented in
financial statements and how users of financial information
analyze them.
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To the Instructor
vii
• The Summary of Study Objectives relates the study objectives to the key points of the chapter. It gives students
key journal entries throughout the text. This feature reinanother opportunity to review, as well as to see how all the
forces the students’ understanding of the impacts of an ackey topics within the chapter are related.
counting transaction on the financial statements.
Key terms and concepts are printed in blue where they are • The Glossary defines all the key terms and concepts introduced in the chapter.
first explained in the text and are defined again in the endof-chapter glossary.
Helpful Hints boxes help clarify concepts being discussed. Developing Skills Through Practice
Accounting in Action boxes give students insight into how • Exercises build students’ confidence and test their basic
skills. Some take a little longer to complete and present
real companies use accounting in practice. The AIA boxes,
more of a challenge. Several exercises stress the applicasome of which are highlighted with striking photographs,
tion of the concepts presented in the chapter. Each exercover business, ethics, and international issues. Of particcise is keyed to one or more study objective.
ular interest are the e-Business Insight boxes reporting on
how business technology is expanding the service provided
Expanding and Applying Knowledge
by accountants.
Technology in Action boxes show how users of accounting One or two exercises in each chapter offer a wealth of resources to help instructors and students pull together the
information use computers.
Color illustrations visually reinforce important concepts of learning for the chapter. These exercises offer projects for
those instructors who want to broaden the learning experithe text.
Infographics, a special type of illustration, help students vi- ence by bringing in more real-world decision-making and critsualize and apply accounting concepts to the real world. ical-thinking activities. The exercises are described below:
They provide entertaining and memorable visual re- • A Financial Reporting Problem directs students to study
various aspects of the financial statements in Hilton’s 2001
minders of key concepts.
Annual Report, which is excerpted in the Appendix at the
Marginal Alternative Terminology notes present synonyend of the text.
mous terms, since terminology may differ in the business
• Exploring the Web exercises guide students to Internet
world.
Web sites where they can find and analyze information to
Before You Go On sections occur at the end of each key
the chapter topic.
topic and often consist of two parts:
* Review It questions serve as a learning check by asking • The Group Decision Case helps build decision-making skills
by analyzing accounting information in a less-structured sitstudents to stop and answer questions about the mateuation. These cases require evaluation of a manager’s decirial covered. Review It questions marked with the Hilton
sion or lead to a decision among alternative courses of acicon (see right) send students to find information in the
tion. As group activities, they promote teamwork.
Hilton Hotels 2001 Annual Report (excerpted in the Ap• Ethics Cases describe typical ethical dilemmas and ask stupendix at the end of the text). These exerdents to analyze situations, identify the stakeholders and
cises help cement students’ understanding Image rights
of how topics covered in the chapter are re- not available the ethical issues involved, and decide on appropriate
courses of action.
ported in real-world financial statements.
Answers appear at the end of the chapter.
* A mini-demonstration problem, in a section called Do
It, gives immediate practice of the material just covered SUPPLEMENTARY MATERIALS AND
and is keyed to homework exercises. An Action Plan TEACHING AIDS
lists the steps necessary to complete the task, and a So- Hospitality Financial Accounting features a full line of teachlution is provided to help students understand the rea- ing and learning resources developed and revised to help you
soning involved in reaching an answer.
create a more dynamic and innovative learning environment.
* The last Before You Go On exercise in the chapter takes
Student success is a major theme of the supplements packstudents back for a critical look at the chapter-opening age. These resources—including print and Internet-based maFeature Story.
terials—also take an active learning approach to help build
Marginal International Notes introduce international is- students’ skills and analytical abilities.
sues and problems in accounting.
• Web site at www.wiley.com/college. Recognizing that the
Marginal Ethics Notes help sensitize students to the realInternet is a valuable resource for students and instructors,
world ethical dilemmas of accounting and business.
we have developed a Web site at www.wiley.com/college to
• The Accounting Equation appears in the margin next to
•
•
•
•
•
•
•
•
•
•
provide a variety of additional resources.
Putting It Together
• Demonstration Problems give students the opportunity to
refer to a detailed solution to a representative problem as
they do homework assignments. Action Plans list strategies to assist students in understanding similar types of
problems.
Instructor’s Resources
For the instructor, we have designed a support package to help
you maximize your teaching effectiveness.
Instructor’s Manual. The Instructor’s Manual is a comprehensive resource guide designed to assist professors in prepar-
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viii
To the Instructor
ing lectures and assignments, including sample syllabi for the
hospitality financial accounting course, evaluating homework
assignments, and preparing quizzes and exams. (Also available at www.wiley.com/college.) Each chapter contains the following information:
• Chapter Review and Lecture Outline: Chapter reviews
cover the significant topics and points contained in each
chapter. Teaching tips and references to text materials are
in the enhanced lecture outlines. Further, a twenty-minute
quiz in the form of ten true/false and five multiple-choice
questions (with solutions) is provided.
• Solutions: These are detailed solutions to all exercises in
the textbook. Suggested answers to the questions found on
the Web site are also included. Each chapter includes a
table to identify the difficulty level and estimated completion time of each exercise.
• Test Bank: The test bank allows instructors to tailor examinations according to study objectives and content. Each
chapter includes exercises as well as multiple-choice,
matching, and true/false questions.
PowerPoint Presentation Material. The PowerPoint lecture
aid contains a combination of key concepts, illustrations, and
problems from the textbook for use in the classroom. Easily customizable for classroom use, the presentations are designed according to the organization of the material in the textbook to
reinforce hospitality financial accounting principles visually and
graphically. (Available at www.wiley.com/college.)
Student Active Learning Aids
In addition to innovative pedagogy included in the text, we
offer a number of valuable learning aids for students. These
are intended to enhance true understanding so that students
will be able to apply hospitality financial accounting concepts.
Working Papers. Working Papers are accounting forms for
all end-of-chapter exercises. A convenient resource for organizing and completing homework assignments, they demonstrate how to correctly set up solution formats and are directly
tied to textbook assignments.
Excel Working Papers. Available on CD-ROM, these Excelformatted forms can be used for end-of-chapter exercises. The
Excel Working Papers provide students with the option of
printing forms and completing them manually, or entering
data electronically and then printing out a completed form.
By entering data electronically, students can paste homework
to a new file and e-mail the worksheet to their instructor.
Self-Study Questions. These online practice tests enable students to check their understanding of important concepts. Located at www.wiley.com/college, the self-study questions are
keyed to the study objectives and students can go back and
review sections of the chapter in which they find they need
further work. The quizzes are graded to give students immediate feedback.
Questions. These questions, located at www.wiley.com/college, provide a full online review of chapter content and help
students prepare for class discussions and testing situations.
Students answer the questions online and then their work is
e-mailed directly to their instructor. Instructors can find the
answers to these questions in the Instructor’s Manual and with
the online instructor resources.
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A C K N O W L E D G M E N T S
During the course of development of Hospitality Financial Accounting I benefited greatly from manuscript reviewers. The
constructive suggestions and innovative ideas of the reviewers and the creativity and accuracy of the ancillary author are
greatly appreciated.
Reviewers
I thank these reviewers of Hospitality Financial Accounting
for their excellent suggestions in shaping the content of this
text and its proposal:
Richard F. Ghiselli, Purdue University
Yang H. Huo, Roosevelt University
Ronald L. Jordan, University of Houston
Lee M. Kreul, Purdue University
Stephen M. Lebruto, University of Central Florida
Patricia McCaughey, Endicott College
Kevin W. Poirier, Johnson & Wales University
Richard Savich, California State Polytechnic University,
Pomona
Don St. Hilaire, California State Polytechnic University,
Pomona
Darrell Van Loenen, University of Wisconsin–Stout
In addition, the reviewers and focus group participants of
the original Financial Accounting, Fourth Edition, provided
excellent feedback to help us write this text:
Sheila Ammons, Austin Community College
David Carr, Austin Community College
Andy Chen, Northeast Illinois University
Edward J. Corcoran, Community College of Philadelphia
Jeff Edwards, Portland Community College
Doug Laufer, Metropolitan State College of Denver
James Lukawitz, University of Memphis
Janice Mardon, Green River Community College
John Marts, University of North Carolina–Wilmington
Kathy S. Moffeit, Southwest Texas State University
Carla Rich, Pensacola Junior College
Patricia Robinson, Johnson & Wales University
Ancillary Author
The input of the ancillary author in her thoroughness and accuracy has created a valuable package of materials to support
this text:
Tanya Venegas, University of Houston
Publications
We would like to thank the Hilton Hotels Corporation for
permitting the use of its 2001 Annual Report.
A Final Note of Thanks
I would also like to convey my sincere thank-you to Jerry Weygandt, Don Kieso, and Paul Kimmel, the authors of the original text. They have graciously given me their trust and the most
wonderful opportunity to adapt their book for use in the hospitality industry. Last but not least, thanks to Julie Kerr, a wonderful friend and editor, who makes this project a pleasure.
Agnes DeFranco
University of Houston
Houston, Texas
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B R I E F
TO
1
2
3
4
5
6
7
8
9
10
11
12
13
C O N T E N T S
THE INSTRUCTOR v
Hospitality Accounting in Action 1
Accounting Principles 34
The Recording Process 74
Adjusting the Accounts 110
Completion of the Accounting Cycle 142
Subsidiary Ledgers and Special Journals 174
Accounting for Merchandising Operations in Hospitality 198
The Statement of Cash Flows 224
Payroll 272
Inventories, Cost Calculations, and Internal Controls 298
Accounting for Receivables and Payables 350
Long-Term and Intangible Assets 382
Sole Proprietorships, Partnerships, and Corporations 412
APPENDIX
Specimen Financial Statements: Hilton Hotels Corporation 457
xvii
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D E T A I L E D
C O N T E N T S
Matching Principle (Expense Recognition)
Full Disclosure Principle
44
Cost Principle
44
CHAPTER 1
HOSPITALITY ACCOUNTING
IN ACTION
F
E AT U R E S T O R Y:
From a Bank to a Hotel
What Is Accounting?
1
Financial Statements
8
8
The Uniform System of Accounts and
Financial Reporting
55
Lodging Industry
56
Foodservice Industry
56
Club Industry
56
Gaming Industry
56
14
Accounting and Financial Management in
Hospitality
57
19
21
Hotel Operations
57
Hotel Accounting Department
Organization
60
Foodservice Operations
62
Club Operations
63
Income Statement
21
Retained Earnings Statement
21
Balance Sheet
23
Statement of Cash Flows
23
APPENDIX
Profession
The Accounting
27
Public Accounting
28
Private Accounting
28
Not-for-Profit Accounting
CHAPTER 3
28
THE RECORDING PROCESS
F
E AT U R E S T O R Y:
CHAPTER 2
World
ACCOUNTING PRINCIPLES
34
F
35
E AT U R E S T O R Y:
Certainly Worth Investigating!
The Conceptual Framework of
Accounting
36
Objectives of Financial Reporting
37
Qualitative Characteristics of Accounting
Information
38
Elements of Financial Statements
39
Operating Guidelines
40
Assumptions
40
Monetary Unit Assumption
41
Economic Entity Assumption
41
Time Period Assumption
41
Going Concern Assumption
41
Principles
41
Revenue Recognition Principle
xviii
47
Classified Balance Sheet
47
Classified Income Statement
48
Analyzing Financial Statements
50
Financial Statement Presentation—An
International Perspective
54
7
Ethics—A Fundamental Business Concept
Generally Accepted Accounting Principles
Assumptions
9
Basic Accounting Equation
11
Transaction Analysis
15
Summary of Transactions
46
Statement Presentation and Analysis
Who Uses Accounting Data
3
Brief History of Accounting
5
Distinguishing Between Bookkeeping and
Accounting
6
Accounting and You
6
The Building Blocks of Accounting
45
Materiality
46
Conservatism
46
Summary of Conceptual Framework
1
2
Using the Building Blocks
Constraints in Accounting
42
42
74
No Such Thing As a Perfect
75
The Account
76
Debits and Credits
77
Debit and Credit Procedures
77
Stockholders’ Equity Relationships
80
Expansion of the Basic Equation
81
Steps in the Recording Process
The Journal
The Ledger
82
83
85
The Recording Process Illustrated
The Trial Balance
97
Limitations of a Trial Balance
Locating Errors
98
Use of Dollar Signs
99
98
Electronic Data Processing
99
89
Comparative Advantages of Manual versus
Computerized Systems
99
A Look into the Future
100
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Detailed Contents
CHAPTER 6
CHAPTER 4
110 SUBSUDIARY LEDGERS AND
SPECIAL JOURNALS
ADJUSTING THE ACCOUNTS
F
E AT U R E S T O R Y:
Timing Is Everything
Timing Issues
111
F
E AT U R E S T O R Y:
112
Selecting an Accounting Time Period
Fiscal and Calendar Years
113
Accrual- vs. Cash-Basis Accounting
Recognizing Revenues and Expenses
The Basics of Adjusting Entries
Folks
113
The Adjusted Trial Balance and Financial
Statements
130
Prepaid Expenses
133
Unearned Revenues
134
Summary of Additional Adjustment
Relationships
135
Journalizing Credit Sales
180
Posting the Sales Journal
180
Proving the Ledgers
182
Advantages of the Sales Journal
Cash Receipts Journal
Purchases Journal
182
184
187
Journalizing Credit Purchases of
Merchandise
187
Posting the Purchases Journal
187
Expanding the Purchases Journal
188
Cash Payments Journal
COMPLETION OF THE
ACCOUNTING CYCLE
Everyone Likes to Win
143
144
Summary of the Accounting Cycle
Correcting Entries—An Avoidable
Step
158
Classified Balance Sheet 161
Standard Classifications
161
Classified Balance Sheet, Illustrated
188
Effects of Special Journals on General
Journal
190
CHAPTER 7
150
Preparing Closing Entries
151
Closing Entries, Illustrated
152
Posting of Closing Entries
153
Preparing a Post-Closing Trial Balance
188
Journalizing Cash Payments Transactions
Posting the Cash Payments Journal
190
142
Steps in Preparing a Work Sheet
145
Preparing Financial Statements from a
Work Sheet
147
Preparing Adjusting Entries from a
Work Sheet
150
Closing the Books
182
Journalizing Cash Receipts Transactions
Posting the Cash Receipts Journal
185
Proving the Ledgers
185
CHAPTER 5
Using a Work Sheet
176
Expanding the Journal—Special
Journals
179
Sales Journal
180
130
Alternative Treatment of Prepaid Expenses
and Unearned Revenues
132
E AT U R E S T O R Y:
Different Roads for Different
175
Nature and Purpose of Subsidiary Ledgers
Example
177
Advantages of Subsidiary Ledgers
178
115
Preparing the Adjusted Trial Balance
Preparing Financial Statements
131
174
Expanding the Ledger—Subsidiary
Ledgers
176
113
114
Types of Adjusting Entries
116
Adjusting Entries for Prepayments
116
Adjusting Entries for Accruals
123
Summary of Basic Relationships
128
F
xix
ACCOUNTING FOR MERCHANDISING
OPERATIONS IN HOSPITALITY
198
155
F
156
Merchandising Operations
E AT U R E S T O R Y:
Pricing for Profitable Margins
Operating Cycles
Inventory Systems
200
201
202
Recording Purchases of Merchandise
165
199
Purchase Returns and Allowances
Freight Costs
206
Purchase Discounts
206
205
203
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xx
Detailed Contents
Recording Sales of Merchandise
Sales Returns and Allowances
Sales Discounts
210
Completing the Accounting Cycle
Adjusting Entries
211
Closing Entries
212
Summary of Merchandising Entries
Work Sheet for a Merchandiser
Using a Work Sheet
Internal Control of Payroll
208
211
Determining the Payroll
212
213
Recording the Payroll
E AT U R E S T O R Y:
Cash Is King
The Income Statement
224
225
Employer Payroll Taxes
226
The Statement of Cash Flows:
Purpose and Format
233
Section 1: Indirect Method for Statement
of Cash Flows
240
First Year of Operations—2004
240
Second Year of Operations—2005
244
CHAPTER 9
272
Payroll: The Important Cost in the
273
Payroll Defined
274
F
E AT U R E S T O R Y:
Jaw
Minding the Money in Moose
299
Inventory Basics
301
Classifying Inventory
301
Determining Inventory Quantities
301
Inventory Accounting Systems
303
304
Recording Transactions
304
Recording Purchases of Merchandise
304
Recording Sales of Merchandise
306
Cost of Goods Sold
306
Determining Cost of Goods Purchased
306
Transfers In and Out
308
Food Cost Calculations
309
Beverage Cost Calculations
310
Income Statement Presentation
310
First Year of Operations—2004
251
Second Year of Operations—2005
258
E AT U R E S T O R Y:
INVENTORIES, COST CALCULATIONS,
AND INTERNAL CONTROLS
298
Periodic Inventory System
Section 2: Direct Method for Statement
of Cash Flows
251
F
288
CHAPTER 10
Purpose of the Statement of Cash Flows
233
Meaning of Cash Flows
234
Classification of Cash Flows
234
Significant Noncash Activities
235
Format of the Statement of Cash Flows
236
Usefulness of the Statement of Cash Flows
237
Preparing the Statement of Cash Flows
238
Indirect and Direct Methods
238
Service Industry
282
FICA Taxes
288
Federal Unemployment Taxes
289
State Unemployment Taxes
289
Recording Employer Payroll Taxes
289
Filing and Remitting Payroll Taxes
290
Multiple-Step Income Statement
226
Single-Step Income Statement
230
Departmental Income Statement
230
Consolidated Income Statement
231
Classified Balance Sheet
232
PAYROLL
282
Maintaining Payroll Department Records
Recognizing Payroll Expenses and
Liabilities
283
Recording Payment of the Payroll
284
Tipped Employees
285
Tip Reporting
285
CHAPTER 8
F
278
Gross Earnings
278
Payroll Deductions
279
Net Pay
281
213
FINANCIAL STATEMENTS
274
Hiring Employees
275
Timekeeping
275
Preparing the Payroll
276
Paying the Payroll
276
Fair Labor Standards Act
277
209
Inventory Costing Under a Periodic
Inventory System
311
Using Actual Physical Flow Costing—
Specific Identification
312
Using Assumed Cost Flow Methods—FIFO, LIFO,
and Average Cost
312
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Detailed Contents
Unearned Revenues
374
Current Maturities of Long-Term Debt
Financial Statement Effects of Cost Flow
Methods
316
Using Inventory Cost Flow Methods
Consistently
318
Inventory Errors
Statement Presentation and Analysis
CHAPTER 12
321
Presentation
321
Analysis
321
Internal Control
LONG-TERM AND
INTANGIBLE ASSETS
F
328
329
334
Making Bank Deposits
334
Writing Checks
334
Bank Statements
336
Reconciling the Bank Account
Intangible Assets
337
ACCOUNTING FOR RECEIVABLES
AND PAYABLES
E AT U R E S T O R Y:
Show Me the Money
Accounts Receivable
351
352
Types of Receivables
352
Recognizing Accounts Receivable
353
Valuing Accounts Receivable
354
Disposing of Accounts Receivable
361
Credit Policies
Notes Receivable
365
Determining the Maturity Date
366
Computing Interest
367
Recognizing Notes Receivable
368
Valuing Notes Receivable
368
Disposing of Notes Receivable
368
What Is a Current Liability?
Notes Payable
371
Sales Tax Payable
372
Payroll and Payroll Taxes Payable
371
373
404
CHAPTER 13
350
SOLE PROPRIETORSHIPS,
PARTNERSHIPS, AND
CORPORATIONS
412
F
E AT U R E S T O R Y: “Two All Beef Patties,
Special Sauce, Lettuce, Cheese, Pickles,
Onions on a Sesame Seed Bun”
413
Sole Proprietorships
Partnerships 415
364
The Credit Department
364
The Credit Policy Prior, During, and
Post Event
364
City Ledger of a Hotel
365
385
402
Patents
403
Copyright
404
Trademarks and Trade Names
Franchises and Licenses
404
Goodwill
405
CHAPTER 11
F
384
Determining the Cost of Long-Term Assets
Land
385
Land Improvements
386
Buildings
386
Equipment
386
Depreciation
388
Revising Periodic Depreciation
396
Expenditures During Useful Life
397
Long-Term Asset Disposals
397
323
327
Internal Control over Cash Receipts
Internal Control over Cash
Disbursements
332
382
E AT U R E S T O R Y: Olympic Retrofit of the Homestead
Resort in Midway, Utah—February 2002
383
Long-Term Assets
322
Principles of Internal Control
Limitations of Internal Control
Use of a Bank
375
319
Income Statement Effects
319
Balance Sheet Effects
321
Cash Controls
xxi
414
Association of Individuals
415
Mutual Agency
415
Limited Life
416
Unlimited Liability
416
Co-Ownership of Property
416
Advantages and Disadvantages of a
Partnership
416
The Partnership Agreement
417
Formation of a Partnership
417
Division of Net Income or Net Loss
418
Partnership Financial Statements
421
The Corporate Form of Organization and
Stock Transactions 422
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xxii
Detailed Contents
Characteristics of a Corporation
422
Forming a Corporation
426
Corporate Capital
426
Accounting for Common Stock Issues
Accounting for Treasury Stock
434
Preferred Stock
438
Dividend Preferences
439
Cumulative Dividend
439
Dividends
431
447
Retained Earnings Restrictions
448
Prior Period Adjustments
449
Retained Earnings Statement
449
APPENDIX
SPECIMEN FINANCIAL STATEMENTS:
HILTON HOTELS CORPORATION 457
440
Cash Dividends
440
Stock Dividends
443
Entries for Stock Dividends
Effects of Stock Dividends
Stock Splits
445
Retained Earnings
444
445
Photo Credits
Index 481
479
c01.qxd 12/19/03 3:03 PM Page A2
HOSPITALITY
ACCOUNTING
IN ACTION
THE NAVIGATOR
✓
• Understand Concepts for Review
❑
• Read Feature Story
❑
• Scan Study Objectives
❑
• Read Preview
❑
• Read text and answer Before You Go On
p. 7 ❑
p. 13 ❑
p. 20 ❑
p. 24
❑
• Work Demonstration Problem
❑
• Review Summary of Study Objectives
❑
• Complete Assignments
❑
1
The Navigator is a
learning system designed to prompt you
to use the learning
aids in the chapter
and set priorities as
you study.
C
ONCEPTS FOR REVIEW
Before studying this chapter, you should know or, if necessary, review:
a. How to use the study aids in this book. (Student Owner’s Manual,
pages x–xvi)
b. The nature of the special student supplements that accompany this
textbook. (Student Owner’s Manual, page viii)
Concepts for Review
highlight concepts from
your earlier reading that
you need to understand
before starting the new
chapter.
✓
THE
NAVIGATOR