Key aspects of accounting for the Hospitality Industry

What are the accounting requirements?

Every successful venture requires financial accounting regardless of the business size. A business accounting system provides financial accounting by recording all activities involved in the creation of monetary inflows of revenue and monetary outflows of expenses resulting from operating activities. They also look over the control of costs, monitoring, planning, and decision making through accounting and bookkeeping.

The accounting system provides the financial information needed to evaluate the effectiveness of current and past operations. This is considered a boon for the hospitality business as it helps to report sales and analyze the industry’s financial position by recording the transactions, analyzing the profits, and keeps track of the budget.

Hospitality accounting includes the following:

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

What are the Key Financial Statements?

An accountant or a bookkeeper has to supervise the handling of the accounting activities and generates the financial statements. These financial statements are the written records that state the business activities and financial performance of the company.

The key financial statements that are required in any business industry are:

Balance Sheets : The balance sheets provide a brief about how assets are funded, liabilities and debt, stockholders equity, and additional paid capital. It is generally summarized as: Assets - Liabilities = Owner's Equity.

It has three major components –

1. Assets : Cash equivalents, liquid assets, current assets, fixed assets and treasury bills, certificate of deposits, accounts receivable, and inventory.
2. Liabilities : Dividends payable, Wages payable, and long-term debts.
3. Shareholder’s Equity : Proprietorship, Partnership, and Corporation. Retail earnings are the amount of net earnings that are not paid to shareholders as dividends. Shareholders' equity represents the amount of money that would be returned to shareholders if all of the assets were liquidated and all of the company's debt was paid off.

Income Statement/ Profit and Loss Statement : It records the cash inflows and outflows during the business period to produce sales revenue. The purpose is to report the economic results of the business entity, sales revenue inflows, and expense outflows to show the results of operations—profit or net loss.

Cash Flow Statement : This provides an aggregate data regarding all the cash flows a company receives from its operations and investments. This offers the investors and analysts a portrait of all the transactions that shows the performance of the business financially.

Why is Payroll Management important for the hospitality industry?

Payroll management is one of the major portions of operational cost for employee payments in the hospitality industry. Receiving accurate payments on time has been one of the important aspects of the business that keeps them motivated and satisfied with their jobs.

Payroll helps you to pay the correct amount to your employees on time, which is highly important in the service-based hospitality industry. It also helps you deal with payroll related events and keeps a track of all the earnings and deductions, keeping a monthly record.