Functioning of the Hospitality Industry - Assignment Example

A A restaurant manager in the hospitality industry is responsible for of the restaurant business unit. He must ensure the restaurant has adequatelevel of food inventory. The manager has to make the weekly purchases of food and keep an accurate record for the controller of the hospitality establishment. The individual must manage the human resources of the restaurant. The position also entails overseen maintenance and food safety compliance. The workload of most managers exceeds 40 hours a week. The restaurant manager performs the recruiting of the employees. The manager must be aware of the citizenship status of the employees that are hired. The government now imposes fines to companies that hired illegal immigrants. 2. The general manager in the hospitality industry manages the day to day operations of the company. The person oversees the entire work staff. His job entails monitoring the performance of the entire business. A good general manager uses performance metrics such as vacancy rate to determine if the firm is achieving the desired profitability levels. Customer service is a very important factor that affects the ability of the business to retain its customers. There is a ranking for hotels called the five star system that evaluates hotel to provide them with a star ranking. Five star hotels can charge a premium price for their services. The mechanism represents a quality assurance mechanism that also provides goodwill to the brand name of the company. 3. The owner of a business enjoys the benefits of the yearly profits of the firm. The owner does not oversee operations, but their advice and approval is needed for major strategic decisions. In public corporations the common stockholders are the owners of the property. They participate in the profits the company earns when the business entity declares dividends. Common statements vote a few times a year on major business decision through a proxy mechanism. The owners of corporation do not have any personal liability if the company goes bankrupt as far as having to pay for corporate debt. 4. The financial controllers oversee the work of the accounting and finance departments. The work performed by internal accountant includes paying payroll, making purchases, paying bills and other obligations, and creation of financial statement among other things. These professionals have to make sure the company accounting records comply with the general accepted accounting principles (GAAP). It is important to document all financial transaction and keep accurate accounting records to comply with state regulations such as the Sarbanes Oxley Act of 2002. Controllers perform financial forecasting to develop business plans. In the tourism industry controllers perform quantitative models to determine the project tourism traffic in different social events. 5. All publicly traded corporations have to comply with SEC regulation that obligates the company to undergo an independent audit. The auditors verify the system for check for material errors, compliance with GAAP and fraudulent activity. The controller has to cooperate with external auditors to make their jobs easier. To comply with independent auditor compliance the auditor of a public company cannot have any other business contracts with the firm in order to avoid conflicts of interest in the auditing process. B. Financial management relates to all activities within a business because all departments within a corporation incur in some form of economic activity. If a person is working in any project the labor performed constitutes a labor expense that financial manager must recognize. The financial managers participate in the financial planning process of all departmental units. C. The accounting profession follows an algorithm known as the accounting cycle. An algorithm can be defined as sequence of steps or processes. The nine steps of the accounting cycle are illustrated below: Analyze Business Transactions Journalize the transactions Post to ledger accounts Prepare trial balance Journalize and post adjusting entries Prepare unadjusted trial balance Prepare financial statements Journalize and post closing entries Prepare a post closing trial balance (Weygandt & Kieso, & Kimmel, 2002, p.148). The reporting requirements company have towards governmental agencies and other private entities such as eh Securities and Exchange Commission are going to be accurate and accountable if the output comes from an accounting system that complies with GAAP. The accounting cycle is the methodology that accounting systems must comply with. In the international forum exists another framework different than GAAP. In Europe the financial reporting framework that is utilized in Europe is called International Financial Reporting Standards (IFRS). D. Two of the most popular accounting information system packages are Peachtree and QuickBooks. Peachtree complete is geared towards an educated crowd with accounting knowledge. QuickBooks is different because the programs targets people that have small business that have little if any accounting knowledge. Peachtree has an internal journal that receives inputs from accountants. The data is transform into business reports by selecting the desired time parameters. For internal purposes the software has the capabilities of instantly creating financial statements for the decision makers of the company. QuickBooks connects with the user by using simple business terminology such as using invoices and vouchers to enter the data. Both software capabilities such as paying and keeping track of payroll, preparation of financial statements, expense or revenue reports, among other features. Both programs have different versions whose sale price varies from $99 to $500. There are other products that are more expensive for corporate clients with special needs. E. 1. The GST is a state tax imposed in Canada of 5% on all goods. 2. The GST in the hospitality industry raises the cost of material purchase due to the five percent valued added excise tax. Hospitality managers have to consider the implications this tax has on its product and service offerings. To make up for the tax expense manager have to either cut its cost or increase its revenues. 3. BAS stands for the basic accounting system of a company. The BAS in the hospitality industry allows manager to keep track of the performance of each business unit. Tools such as cost-volume-profit can help manager evaluate the profitability of the business. The BAS of any company in the industry has to follow the basic rules and procedures of the accounting cycle. In today’s fast changing environment companies must have a computerized accounting information system. 4. There are accounts that have a normal credit balance in a BAS. Some of the accounts that have normal credit balances include sales, short term debt, long term debt, and retained earnings. Contra accounts of assets have normal credit balances. An example of a contra account is machinery accumulated depreciation. F. In the tourism industry the state of the economy directly impacts the industry performance. During recessions people travel less because vacations are considered a luxury leisure expense. When money is tight and economic conditions are bad people get scare to spend large sums of money due to fear of losing their jobs. The government can change the demand for tourism by developing proactive tourism incentive for corporations to improve the vacation fringe benefits employees receive in the form of vacation allowances. Companies in the tourism industry have to take advantage of peek season which is summer and Christmas. G. Accounting managers and the executive managerial staff can benefit from information after performing a cost-volume-profit (CVP) analysis. Some of the formulas used CVP are listed below: Contribution margin ratio = contribution margin / sales Breakeven point in units sold = fixed expenses / unit contribution margin Breakeven in total sales dollars = Fixed expenses / CM ratio Unit sales to attain the target profit = (fixed expenses+ target profit) / Unit contribution margin Dollar sales to attain target profit = (Fixed expenses + target profit) / CM ratio Margin of safety = Total budgeted or actual sales – (Breakeven sales). Margin of safety percentage = margin of safety in dollars / Total budgeted or actual sales Degree of Operating leverage = Contribution margin / net income leverage (Garrison & Noreen, 2003). H. The gross margin is determined by subtracting cost of goods sold from revenues. The total is then divided by the revenues to determine the profit margin ratio. The gross margin can be used for internal decision making to determine which business units are more profitable than others. In the retail sector the profit margin is utilized to create a pricing strategy for each of the products and items the customer sells. The net margin ratio is different than the gross margin ratio because net margin shows the final profits of the firm after cost of goods sold; overhead and tax expenses are deducted. Investors should pay close attention to this metric in their evaluation process. A higher net margin ration means the company is achieving better profitability. To achieve a full understanding of the metric results financial analyst can compare the company’s net margin with the industry standard. A database that provides information regarding financial industry ratios is Dun & Bradstreet. References Garrison, R., Noreen, E. (2003). Managerial Accounting (10th ed.). Boston: McGraw Hills Weygandt, J., Kieso, D., Kimmel, P. (2003). Accounting Principles (6th ed.). New York: John Wiley & Sons. Read More