Chapter2_Lecture_2page[1] - Hotel Adobe Balance Sheet...

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1 Chapter 2 The Balance Sheet Purpose of the Balance Sheet To provide users with useful and reliable information concerning the financial position of the hospitality firm as of the balance sheet date. The financial position of the hospitality firm is shown by listing the assets (resources owned by the business), its liabilities (creditor’s claims), and the equity of the owners A status report—reflecting the financial position of a company at a point in time. An expanded version of the fundamental accounting equation, and thus expresses the dual-aspect concept of accounting. Classified Balance Sheet There is a certain degree of flexibility in classifying assets, liabilities, and owners’ equity accounts. Not every hotel, restaurant, travel agency, or cruise line will make the same balance sheet classifications. We will examine an acceptable version of a classified balance sheet for a hospitality firm. However, keep in mind that other classifications are equally acceptable. Refer to the following sample balance sheet to aid in understanding the following discussion 2 Hotel Adobe Balance Sheet December 31, 2007 (in thousands of dollars) Assets Current assets Cash $4,080 Short-term investments 600 Accounts receivable, less allowance for doubtful accounts of $20 2,060 Inventories 2,200 Prepaid expenses 1,300 Total current assets 10,240 Property and equipment Land 16,800 Buildings 73,000 Furniture and equipment 20,100 Total property and equipment 109,900 Less accumulated depreciateion 14,100 Net property and equipment 95,800 Other assets Preopening expenses 2,850 Investments in Subsidiary Co. 10,200 Total other assets 13,050 Total Assets $119,090 Liabilities and Shareholders' Equity Current liabilities Current portion of long-term debt $3,000 Accounts payable 1,400 Income taxes payable 200 Accrued expenses 1,800 Total current liabilities 6,400 Long-term liabilities Long-term debt, less current installments included above 88,000 Notes payable due 2007 12,000 Total long-term liabilities 100,000 Deferred taxes 4,800 Shareholders' equity Common stock 1,650 Additional paid-in capital 4,100 Retained earnings 2,140 Total shareholders' equity 7,890 119,090
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3 Assets Assets are resources or properties owned by the hospitality organization and represent future values owned by the business. Classification of assets o Three general categories: current assets, property and equipment, and other assets o The asset classifications are listed on the balance sheet in their order of liquidity or expected conversion of cash Current assets o Current assets consist of cash and other assets that are reasonably expected to be converted into cash or consumed by the hospitality firm within one year from the balance sheet date. o
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This note was uploaded on 10/08/2011 for the course HTM 458 taught by Professor Bu during the Spring '09 term at S.F. State.

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Chapter2_Lecture_2page[1] - Hotel Adobe Balance Sheet...

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