HFT%203431

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HFT 3431

• Chapter 1
• Introduction to Managerial Accounting

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The Accounting Profession

• Financial
• Cost
• Managerial
• Tax
• Auditing
• Governmental

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Users of Financial Information

• Owners
• Creditors
• Managers
• Governments
• Investors

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Financial vs. Managerial Accounting

• Financial accounting is historical
• Managerial accounting focuses on analysis,
  information, enhanced controls and planning

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Managerial Accounting

• Management is choosing from alternative courses
  of action
• Managerial accounting is concerned with serving
  internal decision makers
• Managerial accounting links with cost accounting
• Provides financial statement analysis and
  interpretation
• Financial accounting is concerned with serving
  external decision makers

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End Products Used from Financial Accounting

• Balance Sheet (Ch 2)
• Income Statement (Ch 3)
• Statement of Cash Flows (Ch 4)

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The Hospitality Business

• Hotels, motels, motor inns
• All types of food service
• Theme parks
• Transportation services
• Entertainment
• Recreational facilities
• Convention services

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The Hospitality Business

• Seasonal business
• Fluctuating demand
• Short conversion time food beverage
• Selling space
• Perishable product
• Its now or never
• Labor intensive
• Intensive fixed asset requirement

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Accounting Review

• Uniform System of Accounts
• Generally Accepted Accounting Principles (GAAP)
• International Financial Reporting System (Near
  future)

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Principles of Accounting

• Cost
• Business Entity
• Continuity of the Business Unit
• Unit of Measurement
• Objective Evidence
• Full Disclosure
• Consistency
• Matching
• Conservatism
• Materiality

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Cost PrincipleStates that when a transaction is
recorded, the transaction price (cost)
establishes the accounting value
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Business EntityStatements are based on the
concept that each business maintains its own
accounts, that these accounts are separate from
other interests of the owners
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Continuity of the Business UnitThe assumption
that the business will continue indefinitely
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Unit of Measurement

• All transactions are expressed in monetary terms

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Objective EvidenceAccounting records are based
on objective evidence ( invoices, checks, cash
register receipts)
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Full DisclosureFinancial statements must
provide all information pertinent to
interpretation of the financial statements
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ConsistencyThe same accounting method from time
period to time period
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MatchingMatch revenues with expensesCash
versus accrual
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ConservatismRecognize expenses as soon as
possible, but delay recognition of revenues until
they are sure
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MaterialityEvents or information must be
accounted for if they make a difference to the
financial statements
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Cash vs. Accrual Accounting

• Cash basis accounting
• Recognize revenue when cash received, expense
  when cash disbursed
• Accrual basis accounting
• Recognize revenue when earned
• Recognize expense when incurred

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Fundamentals of Accounting

• Balance Sheet
• Assets (Things Owned)
• Liabilities ( Obligations )
• Equity ( Residual Claims on Assets )

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Fundamentals of Accounting

• Income Statement
• Revenues
• - Expenses
• Net Income (Loss)
• Temporary Accounts are Netted and Closed to
  Equity (retained earnings)

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Fundamental Equation

• Assets Liabilities Owners Equity
• Assets Liabilities
• Permanent OE
• Temporary OE
• Assets Liabilities
• Permanent OE
• Revenue
• - Expenses

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Assets

• Resources owned by a business
• Common characteristic the capacity to provide
  future benefit or service
• Use for the purpose production, consumption and
  exchange of goods or services
• Future economic benefits results in cash inflows

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Liabilities

• Claims against assets
• Creditors
• Existing debts and obligations
• Accounts payable
• Notes payable
• Wages payable
• Sales, Real Estate and Income Taxes payable

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Equity

• Claims of the owners on the assets
• Corporations
• Paid in capital
• Retained earnings
• Revenues
• Expenses
• Dividends
• Revenues gt Expenses Net Income
• Revenues lt Expenses (Net Loss)

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Transactions

• Transactions defined economic events of the
  enterprise recorded
• Each transaction may be internal or external
• Each transaction must identify the specific items
  affected and the net change on each item
• Each transaction has a dual effect on the
  accounting equation
• The two sides of the accounting equation must
  always equal

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Effects of Transactions on the Accounting Equation

• Increase in an asset
• Decrease in another asset
• Increase in a liability
• Increase in owners equity
• Increase in a liability
• Increase in an asset
• Decrease in another liability
• Decrease in owners equity
• Increase in owners equity
• Increase in an asset
• Decrease in liability

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Types of Accounts

• Asset Accounts Normal Balance Debit
• Liability Accounts Normal Balance Credit
• Equity Accounts
• Permanent Equity Normal Balance Credit
• Temporary Owners Equity
• Revenue Normal Balance Credit
• Expense Normal Balance Debit

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Debit vs Credit

• Assets and Expenses have a normal balance of a
  Debit
• To increase the balance Debit
• To decrease the balance Credit
• Liabilities, Permanent OE and Revenues have a
  normal balance of a Credit
• To increase the balance Credit
• To decrease the balance Debit

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Forms of Business Organizations

• Sole Proprietorship
• Partnerships
• Limited Partnerships
• Limited Liability Companies (LLC)
• Corporations

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Sole Proprietorship

• Easiest to organize / dissolve
• Legally not a separate business liability
  issues
• It is separate for accounting purposes, however
• Owner not paid a salary or wage - withdrawals

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Partnerships

• Two or more people joined together in a
  non-corporate manner for conducting business. Can
  use a written or oral agreement

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Partnerships

• Advantages
• Greater financial strength
• Does not pay taxes
• Shares liability
• Greater management strength

• Disadvantages
• Partners are taxed on profits regardless of cash
  distribution
• Limits decision making process
• Unlimited legal liability

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Limited Partnerships

• Offers liability protection to limited partners
• General Partner(s) responsible for debts of the
  partnership
• Limited Partner(s) may not actively participate
  in the day to day operations of the business
• Agreement must be written
• Limited partners liability is limited to the
  amount of their investment

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Corporations

• A legal entity created by a state or other
  political authority
• Characteristics
• An exclusive name
• Continued existence independent of stockholders
• Paid in capital represented by shares of stock
• Overall control vested in its directors

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Corporations

• Advantages
• Shareholders liability limited to amount of
  investment
• Owners are taxed on distributed profits
  (dividends)
• Employee equity participation (ESOP)
• Lower tax rates
• Corporation continues on in perpetuity

• Disadvantages
• Double taxation
• Ownership control

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Other Forms Of Business Organization

• S-Corp
• Eliminates double taxation
• Limited to 75 shareholders
• Only one class of stock
• Shareholders pay taxes

• Limited Liability Company (LLC)
• May have unlimited number of owners
• May have a single owner
• Not restricted to one class of stock

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Elements of Ethics

• Use of Company Assets
• Anti-Trust Laws
• Relations With Competitors
• Relations With Suppliers
• Relations With Customers

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Ethics and Hospitality Accounting

• Is the Decision Legal?
• Is the Decision Fair?
• Does the Decision Hurt Anyone?
• Have I Been Honest With Those Affected?

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Ethics and Hospitality Accounting

• Can I Live With My Decision?
• Am I Willing to Publicize My Decision?
• What If Everyone Did What I Did?

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Homework

• Problems 1,2,3,5