Chapter3_lecture_2page[1] - Chapter 3 The Income Statement...

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1 Chapter 3 The Income Statement Purpose of the Income Statement To reflect the results of operations of the hospitality firm for a particular period of time (a month, a quarter, or a year) Revenue and expense accounts are set up to describe the various aspects of the firms’ operations, with the difference in these accounts representing either net income or net loss Income Statement Components: Revenues, Expenses, Gains and Losses Revenues o Inflows of cash or other properties in exchange for goods and services o In a restaurant, for example, the major sources of revenue are food and beverage sales o In a hotel, for example, the major sources of revenue are room sales, food and beverage sales, and casino sales. Other sources of revenue include interest income, franchise fees, management fees, and dividend income Expenses o Goods or services consumed in the regular operations of a business by virtue of the process of earning revenues 2 Gains and losses o Gains and losses are increases (or decreases) in equity resulting from transactions not related to the entity’s main operations o The major operations of hospitality industry firms include sales of rooms, food, beverages, airplane seats, cruise ship cabins, etc. Sales of entire buildings, airplanes, cruise ships, etc. are thus considered secondary activities, for which only gains or loss on the sale is reported on the income statement in order to avoid contaminating revenues reported for the main operating activities. Income Statement in Single-step Format Single-step income statement is normally used for external reporting purposes All revenues and gains (such as other income) are first totaled Total expenses and costs are then deducted from total revenues to arrive at the income before income taxes Income taxes are deducted in determining the amount to net income
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3 Monique Travel Agency Income Statement for the year ended December 31, 2000 Revenues Commissions $25,000 Other income 5,000 30,000 Expenses Salaries and wages $5,000 Supplies 2,000 Administrative and general 3,500 Marketing 1,500 Interest 1,000 Depreciation Other 16,000 Income before income taxes 14,000 Income taxes 5,000 Net income $9,000 In-class Practice Chapter 3: Question 1 The Uniform System of Accounts for the Lodging Industry Uniform Systems of Accounting for the Lodging Industry (USAL) is the generally accepted manual for reporting lodging industry operating results The Hotel Association of New York City developed USAL in 1923, which was approved by the American Hotel and Motel Association 4 The latest version (ninth edition) was published in 1996 Uniform System of Accounts for Restaurants supported by the National Restaurant Association Uniform System of Accounts for Clubs supported by the Club Managers Association Review of the Summary Income Statement The summary income statement is previously known as long-form income statement. It is designed for internal management use Basic structure of the summary income statement Section I Operating departments
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Chapter3_lecture_2page[1] - Chapter 3 The Income Statement...

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