Week 1

Importance of Accounting Informationin Hotel OrganizationGovernment legislationGreater emphasis on financial mattersAudit purposeManagement decision making

5Accounting ProcessTransactionsSource DocumentsClassifying & RecordingJournalsLedgersTrial BalanceAdjustmentsFinancial StatementsNoYes65 Main Groups of AccountsAssetOwners EquityLiabilityRevenueExpenseBalance SheetIncome Statement7Users of Accounting InformationOwnersManagersCreditors/BankersInvestorsEmployeesGovernmentConsumersStudents

4Example of a ledger entryCapital Ms. LavenderCapital Mr. PortoBank AccountBank 25,000Bank 25,000Capital Ms. L 25,000Capital Mr. P 25,000 50,00043Example of a Trial BalanceBank account50,000Capital Ms. Lavender25,000Capital Mr. Porto25,000Trial Balance as at Jan 1, 200644Financial StatementsIncome StatementBalance Sheet Revenue- Expenses= Income/ProfitAssetsO. EquityLiabilities45

AssetsAssets represent resources of value owned by the business entity

8Current AssetsCash or other assets likely to be turned into cash within a year

Cash in HandCash in BankCredit Card ReceivablesAccounts ReceivableMarketable SecuritiesInventoriesPrepaid Expenses9Fixed AssetsNon-current, non-monetary tangible assets used to support business operationLandBuildingFurniture and EquipmentAccumulated DepreciationVehicle

10Other AssetsAssets that do not fit into either current assets or fixed assetsChina, Glassware, Silver, Linen, Kitchen Utensils & UniformDepositsInvestmentsLeasehold CostsLeasehold ImprovementsDeferred Expenses

11

LiabilitiesRepresent debts or obligations owed by the business entity12

Current LiabilitiesThose debts that must be paid or are expected to be paid within a yearAccounts Payable TradeAccrued ExpensesIncome Tax PayableDeposits and Credit BalancesCurrent Portion of Long-term MortgageBank Overdraft13

Long-term LiabilitiesThose due more than one year after the balance sheet dateMortgageBondsDebenturesNotes Payable

14Owners EquityRepresents the equity or the interest of the owners in the enterprise

Owners Equity = Assets - Liabilities

Capital Stock (Common stock / Preferred stock)Capital SurplusRetained Earnings15Try this!!!Classify these accounts into the right groups of accountsCommission receivableMortgageEquipmentUtility depositsCommission revenuePayroll expenseInventoryCommon stockMortgage payableTrade DebtorTrade CreditorLeaseholdLeasehold improvementAmortizationWithdrawalSupplies expensePrepaid insuranceDeposit from customers16Exercise 1Journalize the following transactions:Started business with RM50,000 cash and motor vehicle at RM30,000 cost.Bank in RM35,000 cash into bank account.Paid advertizing expenses RM5,000 by cash.Purchase building using loan from Maybank RM200,000.Paid creditor amount due RM8,000 by cheque.Debtor paid amount owing RM3,000 by cash.Owner took RM2,000 cash for his own use.Bought motor van RM20,000 by cheque.Paid stationery RM1,000 by cash.Monthly instalment payment of loan RM3,000 by cheque.Paid shop assistant salary RM1,500 by cash.Paid electricity bill RM500 by cash.17Exercise 2Cash$52,980Credit card receivable 620Prepaid insurance 3,450Food inventory 3,200Beverage inventory 1,175Building150,000Acc. Depreciation bldg 400Equipment 12,000Acc. Depreciation equip. 125Accounts payable 16,200Sales revenue 24,900Cost of sales$11,225Wages expense 3,800Salaries expense 2,280Utilities expense 282Miscellaneous expense 818Insurance expense 150Depreciation expense 525Payroll payable 880Notes payable100,000Capital100,000From the above adjusted trial balance, prepare:An income statement for the restaurant ended May 31, 2002A balance sheet for the restaurant as at May 31, 200218Exercise 3Salary expenses$52,850Accounts receivable 77,350Capital 1,300,000Food sales315,450Accounts payable 85,400Advertizing expenses 6,500Cash 20,700Retained earnings 77,500Beverage sales 67,250Unearned revenue 9,050Insurance expenses 11,800Utility expenses 35,000Cost of F&B130,000Rent expenses$18,000Prepaid insurance 4,900Drawings 10,060Mortgage 53,250Prepaid rent 9,000F&B inventory 10,850Telephone expenses 4,800Land950,000Building520,000Overdraft 71,660Kitchen equipment 75,500Office equipment 44,250Accrued wages 2,500Prepare an income statement and a balance sheet19Problem 1The Montric Restaurant Case(Handout)Problem 120The Montric RestaurantJournal entryTransaction 12005DescriptionRef.DrCrJune 1Cash in Bank5,000Capital - Ms. Montcalm's 2,500Capital - Mr. Ricardo's 2,500[Initial Capital Investment]21The Montric RestaurantJournal entryTransaction 22005DescriptionRef.DrCrJune 1Cash in Bank10,000Notes Payable10,000[Borrowed $10,000 from bank]22The Montric RestaurantJournal entryTransaction 3Not applicable no economic transaction.23The Montric RestaurantJournal entryTransaction 42005DescriptionRef.DrCrJune 3Rent Expense1,000Cash in Bank1,000[Paid first month's rent]24The Montric RestaurantJournal entryTransaction 52005DescriptionRef.DrCrJune 4Purchases1,800Cash in Bank1,800[Purchased food inventory]25The Montric RestaurantJournal entryTransaction 62005DescriptionRef.DrCrJune 11Cash in Bank4,500Credit Cards Receivable150Accounts Receivable250Sales4,900[Week's sales]26The Montric RestaurantJournal entryTransaction 7Closing stock $1,35027The Montric RestaurantJournal entryTransaction 82005DescriptionRef.DrCrJune 12Prepaid Insurance960Cash in Bank960[Purchased fire insurance]28The Montric RestaurantJournal entryTransaction 92005DescriptionRef.DrCrJune 13Land10,000Cash in Bank2,000Mortgage Payable8,000[Purchased land]29The Montric RestaurantJournal entryTransaction 102005DescriptionRef.DrCrJune 16Drawings - Montcalm's1,000Drawings - Ricardo's1,000Cash in Bank2,000[Partners' withdrawals]30The Montric RestaurantJournal entryTransaction 112005DescriptionRef.DrCrJune 18Drawings - Montcalm's50Purchases50[Partners' withdrawal]31The Montric RestaurantJournal entryTransaction 122005DescriptionRef.DrCrJune 21Cash in Bank80Accounts Receivable80[Received payment on open account]32The Montric RestaurantJournal entryTransaction 132005DescriptionRef.DrCrJune 22Utilities Expense164Accrued Utilities164[Receipt of electricity invoice]33The Montric RestaurantJournal entryTransaction 142005DescriptionRef.DrCrJune 24Salaries Expense480Cash in Bank480[Paid cook's wages]34The Montric RestaurantJournal entryTransaction 152005DescriptionRef.DrCrJune 28Accrued Utilities164Cash in Bank164[Paid electricity invoice]35The Montric RestaurantJournal entryTransaction 162005DescriptionRef.DrCrJune 30Utilities Expense40Cash in Bank40[received and paid water invoice]36The Montric RestaurantLedger entry37End 38Example of source documentsCertificate of shares/partnership agreementBank statement40Received RM10,000 cash from Mr. MM for annual dinner function held.

Dr Cash 10,000 Cr Sales 10,000

Received deposit RM5,000 from Mr. MM for annual dinner function to be held next month.

Dr Cash 5,000 Cr Unearned revneue 5,000

Received the RM5,000 cash for balance of charges for the annual dinner function.

Dr Cash 5,000 Unearned revenue 5,000 Cr Sales 10,00046