LU7: USALI Income Statement, Balance Sheet and Ratio Analysis

Question 1

External Reports

Answer 1

Summarized financial statements prepared for stockholders, creditors, banks and other interested parties

Question 2

Internal reports

Answer 2

Detailed financial statements prepared for executives and managers of the company. Includes confidential information that allows management to make internal operating decisions.

Question 3

Operated department

Answer 3

A department that generates revenue, also known as revenue center. For example rooms department. Other departments that do not produce revenue are called support centers.

Question 4

Package plan

Answer 4

Sometimes hotels sell package plans, offering guests accomodation and other services and products for a single price, to increase revenue. Once a package is sold, a procedure using market value ratios allocates each sales item to the appropriate department. The marketing department provides the market value. The ratio is calculated by dividing each market value by the total market value. Then these percentages can be used to calculate by dividing each market value by the total market value. Then these percentages can be used to calculate the new amounts of the actual selling price.

Question 5

Resposibility accounting

Answer 5

Only expenses that can be directly controlled by the department manager will be charged to that department

Question 6

Direct Expense

Answer 6

Directly related to a specific department

Question 7

Undistributed Operating Expenses

Answer 7

Expenses that cannot be allocated to a revenue center. For the following 4 departments - administrative and general, sales and marketing, property operation and maintenance and ultilities.

Question 8

Management Fees

Answer 8

Expenses that represent the costs of having an independent management company operate the property; theses fees also might be expense allocations from the home office.

Question 9

Fixed charges/costs

Answer 9

Cost that incur regardless of volume, even when the hotel is closed. Also known as occupation costs. Include rent, Property and other taxes. The summary operating statement does not include other fixed costs such as interest, depreciation & amortization

Question 10

Replacement Reserves

Answer 10

An amount specified for future replacement of assets or capital improvements

Question 11

The purpose of Income Statement for Internal Users

Answer 11

To provide management with results of operations
To facilitate comparison to other hotels results of operations
To have comparative standards

Question 12

Format Income statement

Answer 12

Revenue - direct operating Expenses = departmental Operating Income - overhead expenses = net income