Managerial Accounting for the Hospitality Industry, 2nd Edition
November 2016, ©2017
Following a successful debut edition, this new Second Edition of Managerial Accounting for the Hospitality Industry builds on its strengths of clear organization and the ease with which students work through it. This new edition includes more basic math support for students and a more developed inclusion of ethical considerations and global changes both in accounting systems and in the hospitality industry.
About the Authors iii
1 Hospitality Industry Accounting 1
Unique Aspects of the Hospitality Industry 1
The Purpose of Accounting in the Hospitality Industry 3
Branches of Accounting 5
Why Hospitality Managers Use Managerial Accounting 11
The Uniform System of Accounts 13
Ethics and Hospitality Accounting 15
Apply What You Have Learned 19
Key Terms and Concepts 20
Test Your Skills 20
2 Accounting Fundamentals Review 24
Bookkeeping and Accounting 24
The Accounting Equation 26
Recording Changes to the Accounting Equation 27
Generally Accepted Accounting Principles 37
The Hospitality Business Cycle 48
Apply What You Have Learned 52
Key Terms and Concepts 52
Test Your Skills 53
3 The Income Statement 58
The Purpose of the Income Statement 58
Income Statement Preparation 63
Income Statement Analysis 83
Apply What You Have Learned 104
Key Terms and Concepts 104
Test Your Skills 105
4 The Balance Sheet 113
The Purpose of a Balance Sheet 113
Balance Sheet Formats 119
Components of the Balance Sheet 126
Balance Sheet Analysis 138
Apply What You Have Learned 144
Key Terms and Concepts 145
Test Your Skills 145
5 The Statement of Cash Flows 156
Understanding Cash Flows 157
The Purpose of the Statement of Cash Flows (SCF) 158
Sources and Uses of Funds 160
Creating the Statement of Cash Flows 167
Statement of Cash Flows Analysis 182
Apply What You Have Learned 185
Key Terms and Concepts 186
Test Your Skills 186
6 Ratio Analysis 196
Purpose and Value of Ratios 197
Types of Ratios 200
Comparative Analysis of Ratios 243
Ratio Analysis Limitations 245
Apply What You Have Learned 247
Key Terms and Concepts 247
Test Your Skills 248
7 Food and Beverage Pricing 258
Food and Beverage Pricing 258
Factors Affecting Menu Pricing 258
Assigning Menu Prices 262
Menu Price Analysis 269
Apply What You Have Learned 287
Key Terms and Concepts 287
Test Your Skills 288
8 Revenue Management for Hotels 294
Establishing Room Rates 294
Revenue Management 307
Non ]Room Revenue 320
Apply What You Have Learned 324
Key Terms and Concepts 324
Test Your Skills 325
9 Managerial Accounting for Costs 334
The Concept of Cost 334
Types of Costs 336
Cost/Volume/Profit Analysis 354
Apply What You Have Learned 362
Key Terms and Concepts 363
Test Your Skills 363
10 Forecasting in the Hospitality Industry 373
The Importance of Accurate Forecasts 374
Forecast Methodology 376
Utilizing Trend Lines in Forecasting 393
Apply What You Have Learned 396
Key Terms and Concepts 397
11 Budgeting and Internal Controls 402
Importance of Budgets 403
Types of Budgets 405
Operations Budget Essentials 408
Developing an Operations Budget 409
Monitoring an Operations Budget 417
Cash Budgeting 427
Managing Budgets through Internal Control 434
Apply What You Have Learned 439
Key Terms and Concepts 440
Test Your Skills 440
12 Capital Investment, Leasing, and Taxation 450
Capital Budgeting 451
Capital Investment 454
Financing Alternatives 467
Apply What You Have Learned 483
Key Terms and Concepts 484
Test Your Skills 484
NEW! Updated financial statements that incorporate changes in the Uniform System of Accounts for Restaurants (USAR) and the Uniform System of Accounts for the Lodging Industry (USALI). All financial statements in this revised version of the text have been reformatted to conform to the recommendations presented in the newly released 8th edition of the USAR and the 11th edition of the USALI.
NEW! Here’s How It’s Done “Here’s How It’s Done” is a new feature used to assist students in areas where math concepts may be challenging. Simple step‐by‐step instructions on how frequently used calculations are made help readers see exactly how to apply mathematical procedures to areas of importance.
NEW! Consider the Cost Case Studies These new, real‐life scenarios, added to each chapter, allow readers to directly apply the concepts presented in the text to realistic challenges they will likely encounter as managers. Instructors can incorporate this new feature as in‐class discussions or as take‐home assignments.
NEW! Managerial Accounting Around the World The hospitality industry is increasingly globalized. This unique feature, presented in each chapter, illustrates the importance of understanding managerial accounting from a global perspective.
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