Hospitality Accounting

Basic Understanding of Accounting.

Accounting is the process of recording, classifying, summarizing, analyzing, interpreting and reporting financial transactions. Basically, accounting and financial reporting are synonymous which can be classified into several fields like financial accounting, management accounting, cost accounting, external auditing, and tax accounting.

About Hospitality Accounting.

The hospitality sector is an industry that is primarily focused on customer satisfaction through lodging, food and drink facility, event planning, travel and tour package planning, and organizing and many more. This industry is quite big and entirely depends upon the leisure and desire of people to explore new things and places. More than business this sector focuses on excellency in service because a bad experience may them never come back to use our services.

Therefore, accounting practiced in the hospitality sector is said to be hospitality accounting. In other words, the recording, classifying, summarizing, analyzing, interpreting and recording financial transactions of the hospitality sector is said to be hospitality accounting. Every business firm or entity requires accounting so does the hospitality sector. Every hotel or travel agency maintain their balance sheet or income statement in order to figure out their profit or loss or their financial position in the market.

Meaning of Hospitality Accounting.

Hospitality Accounting is concerned with providing specialized internal financial information regarding firm strengths, weakness, position, and cash status to a manager who is responsible for directing and controlling operations within a Hospitality organization.

Hospitality accounting includes the followings:

•         Preparing a precise collection of month-end account
•         Budget preparation
•         Business planning
•        Creating financial statements and balance sheets
•         Payroll

Accounting procedures in the hospitality sector:

Just like in any other business accounting does exist in the hospitality sector as well but the accounting in the hospitality sector differs slightly.

•  Recording revenue: The advance payments for bookings or reservations have not yet been earned so such deposits are not revenue until and unless the guests use the services provided by the service industry in return of the payment they make. Hence, such deposits are considered to be deferred revenue.
• Determination of sales: In the hospitality sector the major costs are service provided and labor. And the number of sales is determined by keeping a huge profit margin.
• Operating expenses: Depending on the payment made the operating expenses like rent, insurance, etc are either debited or credited.

Importance of Hospitality Accounting

•  It enables us to have a deep glance at the financial status of the business. Regular updates about business enable us to take better business decisions and achieve greater outcomes.
•   It saves a lot of time and efficiency due to maintainenace of proper records.
• Accurate information of cash flow
•  Facilitates for effective allocation of money for different units of business
• Assists in planning and forecasting future needs.