HRT 374 Lecture Notes - Lecture 3: Income Statement, Financial Statement
8 views2 pages
29 Feb 2020
School
Department
Course
Professor
Chapter 3: The Income Statement
Major Elements of the Income Statement
Revenues (food sales, beverage sales, room sales) represent the inflow of assets, reduction of
liabilities, or a combination of both resulting from the sale of goods or services. Expenses (costs
of goods sold, labor, utilities, advertising) represent the outflow of assets, an increase in
liabilities, or a combination of both in the production and rendering of goods and services. Gains
are defined as increases in assets, reductions in liabilities, or a combination of both resulting
from a hospitality operation’s incidental transactions and from all other transactions and events
affecting the operation during the period, except those that count as revenues or investments by
owners. Losses are defined as decreases in assets, increases in liabilities, or a combination of
both resulting from a hospitality operation’s incidental transactions from other transactions and
events affecting the operation during a period, except those that count as expenses or
distributions to owners.
Relationships with the Balance Sheet
The income statement covers a period of time, while the balance sheet is prepared as of the last
day of the accounting period. The income statement reflects the operations of the hospitality
property for the period between balance sheet dates.
Income Statements for Internal and External Users
Income statements provided to external users (summary income statements) are relatively
brief, providing only summary detail about the results of operations.
Uniform Systems of Accounts
Uniform systems of accounts are standardized accounting systems prepared by various
segments of the hospitality industry. A uniform system of accounts provides a turnkey system for
new entrants into the hospitality industry by offering detailed information about accounts,
classifications, formats, and the different kinds, contents, and uses of financial statements and
reports.
Contents of the Income Statement
The summary income statement is divided into three major sections.
(1) Operated Departments
This section reports net revenue by the department for every major revenue-producing
department. For each department generating revenues, direct expenses are reported. These
expenses relate directly to the department incurring them and consist of three major categories:
cost of sales, payroll and related expenses, and other expenses.
Cost of sales is normally determined as follows:
Beginning Inventory