Tomlinson-Online - Accounting and Financial Management in Foodservice Operations

Accounting and Financial Management in Foodservice Operations A concise and easy-to-follow guide to the principles of accounting and finance as they apply to running foodservice operations Accounting and Financial Management in Foodservice Operations is an up-to-date and straightforward treatment of the financial standards and concepts owners and operators need to successfully run a foodservice operation. Learn how to understand and assess the financial performance of a foodservice business by using professionally prepared financial reports. The book explains the Uniform System of Accounts for Restaurants (USAR), as well as how to read income statements, balance sheets, and statements of cash flows. It discusses how to calculate a break-even point and demonstrates pricing tips to help owner/operators create a profitable menu. Other contents include: A thorough introduction to controlling food and beverage product costs Practical discussions of how to manage the cost of labor and staffing, as well as how to prepare an accurate operating budget Hands-on strategies for comparing planned and budgeted operating results to actual financial results Perfect for students in foodservice-related courses, Accounting and Financial Management in Foodservice Operations will also benefit foodservice establishment owners and operators and professionals working in colleges, hospitals, nursing homes, and more.

Preface ix Acknowledgments xiii Dedication xv 1 Fundamentals of Accounting and Financial Management 1 Professional Accounting 2 Accounting for Effective Financial Management 3 Accounting Specializations 5 Users of Accounting Information 10 The Uniform System of Accounts for Restaurants (USAR) 11 Generally Accepted Accounting Principles (GAAP) 13 The Mechanics of Financial Management 20 Bookkeeping 20 Summary Accounting 21 Financial Analysis 21 Ethics in Accounting 22 2 The Mechanics of Accounting 27 Recording Business Transactions 28 The Basic Accounting Equation 29 Accounts Used in the Basic Accounting Equation 31 Asset Accounts 32 Liability Accounts 33 Owners’ Equity Accounts 34 Revenue and Expense Accounts 35 Recording Changes to the Basic Accounting Equation 37 Double- Entry Accounting 38 The Journal and General Ledger 39 Credits and Debits 40 Security of Financial Data 48 3 The Income Statement 55 The Importance of the Income Statement 56 Users of the Income Statement 59 Frequency of Income Statement Preparation 63 USAR Income Statement Format 64 Sales (Revenue) 65 Total Cost of Sales 66 Total Labor 68 Prime Cost 70 Other Controllable Expenses 71 Non- Controllable Expenses 75 Profits (Income) 77 Ebitda 78 Utilizing the Income Statement 80 Supporting Schedules 80 Comparative Analysis 81 4 The Balance Sheet 88 The Importance of the Balance Sheet 89 Users of the Balance Sheet 90 Limitations of the Balance Sheet 94 USAR Balance Sheet Format 95 Assets 95 Liabilities and Owners’ Equity 104 Analysis of the Balance Sheet 107 Ratio Analysis 107 Vertical Analysis 114 5 The Statement of Cash Flows 120 The Importance of Cash Flow 121 Sources and Uses of Funds 125 Creating the Statement of Cash Flows 131 Cash Flow from Operating Activities 133 Cash Flow from Investing Activities 138 Cash Flow from Financing Activities 139 Net Changes in Cash 140 Supplementary Schedules 142 Statement of Cash Flows Analysis 145 6 Understanding Costs and Break- even Analysis 150 The Importance of Understanding Costs 151 Types of Costs 152 Fixed and Variable Costs 153 Mixed Costs 156 Step Costs 163 Direct and Indirect (Overhead) Costs 164 Controllable and Non- Controllable Costs 165 Other Types of Costs 166 Break-even Analysis 170 Computation of Break- even Point 172 7 Profitable Pricing 181 Pricing for Profits 182 The Importance of Price 182 The Operator’s View of Price 183 The Guest’s View of Price 184 Factors Affecting Menu Pricing 185 Economic Conditions 186 Local Competition 187 Level of Service 187 Type of Guest 188 Product Quality 188 Portion Size 189 Delivery Method 190 Meal Period 191 Location 191 Bundling 192 Methods of Food and Beverage Pricing 194 Cost-based Pricing 194 Contribution Margin- based Pricing 197 Evaluation of Pricing Efforts 199 Menu Engineering 199 Calculating Popularity (Number Sold) 199 Calculating Weighted Contribution Margin 200 Menu Modifications 203 8 Food and Beverage Cost Control 207 The Importance of Food and Beverage Cost Control 208 Sales Forecasts 209 Standardized Recipes 212 Purchasing and Receiving Products 214 Purchasing Food and Beverage Products 214 Receiving Products 218 Managing Inventory and Production 223 Placing Products in Storage 223 Maintaining Product Security 225 Managing Production 226 Controlling the Cost of Sales Percentage 228 Controlling Food Costs 228 Controlling Beverage Costs 229 Optimizing Cost of Sales 231 9 Labor Cost Control 238 The Importance of Labor Cost Controls 239 Total Labor Costs 239 Factors Affecting Total Labor Costs 241 Accounting for Total Labor Costs 246 Types of Labor Costs 247 Accounting for Labor Costs 247 Assessment of Total Labor Costs 251 Sales per Labor Hour 252 Labor Dollars per Guest Served 253 10 Operating Budgets 263 The Importance of Operating Budgets 264 Types of Operating Budgets 264 Advantages of Operating Budgets 265 Creating an Operating Budget 266 Revenue Forecasts 268 Expense Forecasts 270 Monitoring the Operating Budget 276 Comparing Planned Results to Actual Results 277 Modifying the Operating Budget 283 11 Cash and Revenue Control 288 The Importance of Revenue Control 289 External Threats to Revenue Security 290 Internal Threats to Revenue Security 291 Developing a Revenue Security Program 296 Objectives of Internal Revenue Control 296 Elements of Internal Revenue Control Systems 297 Implementing and Monitoring a Revenue Security Program 299 Verification of Product Issues 300 Verification of Guest Charges 302 Verification of Sales Receipts 303 Verification of Sales Deposits 303 Verification of Accounts Payable (AP) 305 12 Accounting for Fixed and Other Assets 310 Accounting for Fixed Assets 311 Recording Fixed Asset Purchases 312 Depreciating Fixed Assets 314 Straight-Line Depreciation 314 Double Declining Balance Depreciation 315 Other Issues Related to Fixed Assets 317 Uniforms, Linens, China, Glass, Silver, and Utensils 317 Disposal of Fixed Assets 318 Exchange of Fixed Assets 319 Accounting for Other Assets 321 Choosing Professional Accounting Assistance 322 Monitoring Evolving Accounting Issues 327 Glossary G-1 Index I-1