AVSC 2180 Lesson 9 - Lesson 9 Revenue Accounting There is...

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Lesson 9 Revenue Accounting There is an old saying that goes, “If your outgo exceeds your income, your upkeep will be your downfall.” This means if you spend more than you make, you won’t stay in business very long. The airline industry is highly competitive and volatile. Product prices are constantly fluctuating as managers attempt to maintain competitive advantages. Operating costs vary as commodity markets rise and fall. Fuel represents the largest single cost for the airlines, as oil prices rise and fall, analysts constantly monitor fuel prices in conjunction with market performance and demand forecasts and adjust fares in order to maintain a positive bottom line. All businesses must keep accurate, up-to-date records of cash receipts and expenditures in order to continue operating. Finance and accounting sciences provide the methodology for recording and evaluating business performance. Finance addresses how an organization raises and allocates limited monetary resources, taking into account the risks associated with investment alternatives; for example, lease vs. purchase or debt vs. equity etc. Accounting on the other hand focuses on tracking and monitoring financial activity as it occurs and reporting financial results in a consistent meaningful manner. Revenue management is an aspect of finance dealing with understanding, anticipating and reacting to consumer behavior in order to maximize revenue and ultimately profits. Revenue management and revenue recognition is a big part of any organization’s daily activity. In personal finance funds are received and distributed to pay expenses or purchase assets; sustaining a quality of life, and allowing for future plans. An airline is no different, things just occur on a much grander scale. The airline must account for and distribute revenue to expenses and assets and have sufficient for future planning. In its fundamental form a revenue management systems is no different than your checkbook or online bank account. Funds are deposited into the account and checks are written, taking money out of the account. Revenue management systems work much like this, on a much larger scale. Enterprise Resource Planning (ERP) The trend in the airline industry is to integrate revenue management and subsidiary systems into Enterprise Resource Planning systems (ERPs). ERPs integrate the data and processes from diversified operating functions into a unified system. A typical ERP system will use multiple components of computer software and hardware to achieve the integration. An example of this in the airline industry would be the integration of a Central Reservation System (CRS) and a Yield Management System (YMS). The airlines use yield management systems (YMS) or revenue management to analyze consumer
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This note was uploaded on 09/04/2011 for the course AVSC 2180 taught by Professor Brown during the Spring '11 term at Utah Valley University.

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AVSC 2180 Lesson 9 - Lesson 9 Revenue Accounting There is...

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