Financial Mgmt

1. Chapter 13
Financial Management
Food and Beverage Operations
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2. Chapter Objectives
 Describe the origins and the advantages
of uniform systems of accounts.
 Explain how an operations budget is used
as a standard.
 Identify the components and uses of
income statements and balance sheets
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3. Chapter Objectives (cont.)
 Describe and calculate liquidity,
solvency, activity, profitability, and
operating ratios.
 Briefly discuss fundamental accounting
tasks typically performed by software
programs.
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4. Managing the Accounting System
 Staff (advisory) personnel: managers,
bookkeepers, and controller
 Internal users: all managers
 External users: owners and investors,
creditors and lenders, government
agencies, the public
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5. General Accepted Accounting
Unit of
measurement
Historic
cost
Going
concern
Conservatism
Objectivity
Realization
Matching
Consistency
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6. Cash Accounting vs. Accrual
Accounting
 Cash accounting: records transactions
only when cash is received or paid out
 Accrual accounting: records expenses
incurred during an accounting period
but are not actually paid until the
following period
◦ Conforms to matching principles
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Two types depend on size of
opera1on

7. Advantages of a Uniform
System of Accounts
 Turnkey system for new business
 Standardized financial statement
formats
 Explanations of individual accounts
 Sample bookkeeping documents
 Continually revised
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8. Advantages of a Uniform
System of Accounts (cont.)
 Widely adopted and recognized
 Provides common language and basis
for comparison between operations
 Facilitates reporting of industry statistics
Exhibit 1, p.353 The Restaurant Industry Dollar
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9. LIU, HOST154 MCC Hospitality & Tourism
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10. The Operations Budget
 Profit plan
◦ Projecting revenue
◦ Determining profit requirements
◦ Estimating expenses levels
 Control tool
◦ Budgets
◦ Reports
◦ Variances
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Budget controls and guides principles of
business

11. Accounting Techniques
 Internal controls
◦ Comparative statistical analysis
◦ Planning and forecasting sales and cost of
goods sold
◦ Dept. budgeting controls
◦ Predetermined standards and evaluation
reports
◦ Storage areas
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12. Accounting Techniques (cont.)
◦ Cost analysis
 Fixed
 Variable
 Mixed
◦ Cost-volume-profit (CVP) analysis
 Used to set specific profit objectives
◦ Cash budgeting

helpful in managing property’s cash
flow
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13. Uses of Income Statements
 Financial statement that consists of info
regarding the results of operations,
including revenue, expenses, and
profit
 Financial statement on regular basis
 Efficiency of management
 Controllable expenses
 Supporting schedules
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14. The Income Statement
 Calculating actual food cost/cost of sales
◦ Cost of Sales = Beginning Inventory +
Purchase – Ending Inventory
◦ Food Cost Percentage = Food Cost of
Sales / Food Revenue X 100
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15. The Income Statements (cont.)
Adjustment to basic cost of sales
Exhibit 7 p.362
Cost of Sales : Food Charge to:
Value of Beginning
Inventory
+ Purchases
- Value of Ending
Inventory
Unadjusted Cost of
Sales: Food
+Transfers to Kitchen Food Cost
- Transfers from kitchen Beverage Cost
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- Employee Meal Cost Labor Cost
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- Value of complimentary Promotion

16. The Balance Sheet
 A finical statement giving the account
balances for:
◦ Assets: current/liquidity or noncurrent
◦ Liabilities: current or noncurrent
◦ Equity: the amount of the funds contributed
by the owners (the stockholders) plus the
retained earnings (or losses)
Assets = Liabilities + Equity
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17. Five Common Ratio Groups
Three standards:
1. Liquidity
1. A past period
2. Solvency
2. Industry average
Return On 3. Activity
Investment (ROI) 4. Profitability
3. The budget 5. Operating
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18. Liquidity Ratios & Solvency
Ratios
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19. Activity Ratios & Profitability
Ratios
 Food Inventory Turnover =
Cost of Food Revenue/Average
Inventory
 Profit Margin =
Pretax Net Income/Total F&B
Revenue
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20. Operating Ratios
 Food Cost Percentage =
Cost of Food Cost/Food
Revenue
 Beverage Cost Percentage =
Cost of Beverages Sold/Beverage
Revenue
 Labor Cost Percentage =
Labor Costs/Total F&B Revenue
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21. Operating Ratios (cont.)
 Average Food Service Check =
Total F&B Revenue/Guests Served
 Seat Turnover =
Number of Guests Served / Number of
Available Seats
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22. Technology and the Accounting
Process
 Accounts receivable software
 Accounts payable software
 Payroll accounting software
 Financial reporting software
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23. LIU, HOST154 MCC Hospitality & Tourism
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24. Fiscal Review
 Describe the origins and the advantages of uniform
systems of accounts.
 Explain how an operations budget is used as a
standard.
 Identify the components and uses of income
statements and balance sheets
 Describe and calculate liquidity, solvency, activity,
profitability, and operating ratios.
 Briefly discuss fundamental accounting tasks
typically performed by software programs.
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