Fundamentals of

Financial Management

Workbook

ACADEMIC YEAR 2023/2024

Copyright

© 2023 Hotelschool The Hague, The Netherlands

All rights reserved. No part of this publication may be reproduced, stored in a

retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the Hotelschool The Hague.
Table of Contents
Structure of the Workbook .............................................................................................................................................................................................2

Literature ........................................................................................................................................................................................................................................3

Financial Accounting Session 1: Introduction to Accounting ...............................................................................................................5

Financial Accounting Session 2: The Fundamental Accounting Equation ............................................................................ 14

Financial Accounting Session 3: The Generally Accepted Accounting Principles and the Income

Statement ...................................................................................................................................................................................................................................23

Financial Accounting Session 4: Accounting for Cost of Sales and Inventory ................................................................... 35

Financial Accounting Session 5: Depreciation and Statement of Retained Earnings................................................... 43

Financial Accounting Session 6: The Balance Sheet ..............................................................................................................................48

Financial Accounting Session 7: Accounting Cycle and Double entry accounting........................................................67

Financial Accounting Session 8: Trial Balances and Adjustments ............................................................................................... 81

Financial Account Session 9: Preparation and Analysis of Financial Statements............................................................ 91

Financial Accounting Session 10: Internal Controls and Accountability ............................................................................... 102

Managerial Accounting Session 1: The Uniform System of Accounts for the Lodging Industry (USALI) ... 116

Managerial Accounting Session 2: Ratio Analysis at a company and departmental level .....................................137

Managerial Accounting Session 3: Basic Cost Concepts .................................................................................................................. 154

Managerial Accounting Session 4 & 5: Cost-Volume-Profit Analysis ..................................................................................... 163

Managerial Accounting Session 6: Operating Leverage ....................................................................................................................175

Food & Beverage Cost Accounting Session 1 & 2: Food service cost controls ............................................................... 181

Food & Beverage Cost Accounting Session 3: Selling Prices of Menu items ..................................................................204

Food & Beverage Cost Accounting Session 4: Menu Engineering ........................................................................................... 210

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Structure of the Workbook
The workbook covers the following 20 sessions:
FA Financial Accounting 10 sessions
MA Managerial Accounting 6 sessions
F&B Food and Beverage Cost Accounting 4 sessions

Each session consists of learning goals that will be achieved through studying the
required reading, completing the pre-session assignments, participating in
classroom discussions and the in-class assignments.

For all sessions students are expected to read the required reading, make their own
study notes, identify the topics that need further clarification during the class
session and complete the pre-session assignments.
During the class sessions the pre-class preparation and student questions will form
the basis of the discussions. Additional in-class assignments will be handed out and
completed during the session.

Study notes and assignments must be done in the form in handwritten work, and it
is advisable to acquire a good size A4 notebook for this. Make sure to bring a non-
programmable calculator to every class.

Learn how to take good notes with these note taking tips:

Make sure to read and refer to the Myhotelschool site for the course
Fundamentals of Financial management. Here you can also find the Course
Syllabus which is the official document explaining how the course work and
important rules that apply.

2
Literature

The required reading is taken from the following textbooks:

- Cote, R. Hotel and Restaurant Accounting, 8th edition, Lansing (MI):

Educational Institute American Hotel & lodging Association.

- Schmidgall, R. Hospitality Managerial Accounting, 8th edition, Lansing (MI):

Educational Institute American Hotel & lodging Association.

- Damitio, J.W and Schmidgall, R. Hospitality Financial Accounting, 4th edition,

Lansing (MI): Educational Institute American Hotel & lodging Association.

- Ninemeier, J. R. Planning and Control for Food and Beverage Operations, 9th
edition, Lansing (MI): Educational Institute American Hotel & lodging
Association.

- Dopson, L.R and Hayes, D.K, Food and Beverage Cost Control, 6th edition J. R.
Planning and Control for Food and Beverage Operations, 9th edition, Wiley

In some of the sessions QR codes are provided for links to videos that give further
explanation of some of the concepts covered in the reading.

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Financial Accounting

Sessions 1 – 10

4
Financial Accounting Session 1: Introduction to Accounting

Learning Goals:

 Identify the purpose of accounting.

 Identify the main users of accounting information.

 Explain the concept of business transactions.

Required Pre-session reading:

Taken from Hotel and Accounting, R. Cote, 8th Ed

Make your own handwritten study notes and write down any points or questions
you have for the class session.

Required Pre-session Assignment 1

Answer the following questions after you did the required reading:

1. The main purpose of a business is to generate profit. Describe what ‘”profit” is.
2. What do you understand by the term ‘accounting’?
3. The main goal of a business is to generate profit. How does accounting help
managers to reach this goal?
4. How does management keep the owners of the business up to date with the
performance of the business?
5. Who are the main users of accounting information?
6. Why do you need to study accounting?
7. Name and explain the six branches of accounting?
8. What is the definition of a ‘business transaction’?

Required Pre-session Assignment 2

Answer the following questions after you did the required reading:

In the reading three different examples of transactions are explained.

1. Describe three other examples of transactions that can take place in a hotel.
2. Describe which departments and employees are involved in the transactions
you described.

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FA Session 1: Required Reading

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Financial Accounting Session 2: The Fundamental
Accounting Equation

Learning Goals:

 Understand the fundamental accounting equation.

 Recognize the five account classifications and hospitality-based Chart of

Accounts.

 Apply the fundamental accounting equation.

Required Pre-session reading:

Taken from Hotel and Accounting, R. Cote, 8th Ed

Make your own handwritten study notes and write down any points or questions you
have for the class session.

Required Pre-session Assignment 1

Answer the following questions after you did the required reading:

1. What is a chart of accounts?

2. Besides the revenue accounts that are listed in the example chart of
accounts, describe three other revenue accounts that you would expect in
the chart of accounts of a resort hotel.
3. Explain how revenue and expense accounts are included in the accounting
equation.
4. Explain what is meant with the term ‘financial position’.
5. Explain how double-entry accounting link (relate) to the accounting equation.

Required Pre-session Assignment 2

Consider the following transactions and name the two accounts that are affected by
each transaction:

1. The monthly salaries are paid to the employees via internet bank transfers.
2. The restaurant manager orders new crystal glasses for the restaurant on
account from a supplier.
3. A hotel guest orders a drink in the bar and charges it to her room account.
4. A hotel guest checks out a pays his room account with his debit card.

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FA Session 2: Required Reading

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Analysing Business Transactions:

In order to record business transactions in bookkeeping as the start of

the accounting cycle, every transaction needs to be analysed to
determine which bookkeeping accounts are affected:

The steps involved are as follows:

Step 1: Identify the names of the accounts that are affected.

Step 2: Identify the effect on these accounts; does the account

increase or decrease?

Step 3: Identify the account type classification of the affected

accounts; which of the five types of accounts are the affected
accounts?

Step 4: Identify the debit and credit entries.

For now, we will focus on the first three steps and in a later session we
will use step 4 to be able to record the transaction in the journals as
part of the bookkeeping process which is the initial phase of the
accounting cycle.

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(Payroll)

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The following videos are helpful for further explanations of some of the
concepts covered in this session:

The Five Account Types

The Accounting Equation

Business Transactions and the Accounting Equation

Make sure that you are logged in on Microsoft Office with your
hotelschool user account to go directly to the video

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Financial Accounting Session 3: The Generally Accepted
Accounting Principles and the Income Statement

Learning Goals:

 Understand the main (Generally Accepted Accounting Principles (GAAP)

 Identify the purpose of and understand the contents of the income

statement.

 Identify the accounts used to prepare an income statement and

distinguish between the typical day-to-day operating and fixed expenses.

Required Pre-session reading:

Taken from Hotel and Accounting, R. Cote, 8th Ed

Make your own handwritten study notes and write down any points or questions
you have for the class session.

Required Pre-session Assignment 1

Answer the following questions after you did the required reading:

1. What is meant with Full Disclosure and how do accountants achieve this?
2. Explain what is meant with the Matching principle.
3. How does inflation affect the Unit of Measurement principle?
4. Why should accountants adhere to the Conservatism principle?

Required Pre-session Assignment 2

Answer the following questions after you did the required reading:

1. Name the four main financial statements.

2. Explain for which time period financial statements are created.
3. What are the four levels of profit in a basic Income Statement?
4. Why are the operating expenses listed separately form the fixed charges in an
Income Statement?
5. Explain why Income Tax is deducted as the last item in an Income Statement.

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FA Session 3: Required Reading

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(Covered in session FA5)

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Financial Accounting Session 4: Accounting for Cost of Sales
and Inventory

Learning Goals:

 Understand the differences between the perpetual inventory system and

the periodic inventory method.

 Apply the accounting rules for employee meals, cost of food or beverage
sales, transfers and food used.

Required Pre-session reading:

Taken from Hotel and Accounting, R. Cote, 8th Ed

Make your own handwritten study notes and write down any points or questions
you have for the class session.

Required Pre-session Assignment 1

Answer the following questions after you did the required reading:

1. Explain the three main differences between the Perpetual and Periodic
inventory systems.
2. Clearly describe three different advantages of using the Perpetual Inventory
System instead of the Periodic Inventory system.
3. Explain a drawback of using the Perpetual Inventory system.
4. Explain the difference between Cost of Food Used and Cost of Food Sales
5. Give an example of transfers of items between department.
6. How are transfer recorded and why is it important to do so?
7. What happens to the costs of providing complementary meals and employee
meals?

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FA Session 4: Required Reading

Accounting for Cost of Sales and Inventories

So far, we have looked at several aspects of accounting and the different

bookkeeping accounts that are found in the Financial Statements.
A very important aspect of the accounting and control function in a Hospitality
business is to keep track of the Cost of Food Sales, Cost of Beverage Sales, Food
Inventory and Beverage Inventory.
Be aware that separate bookkeeping accounts are kept for Food and Beverages.

As we saw, Cost of Food Sales and Cost of Beverage Sales are expenses found in
the Income Statement.

The cost of sales accounts represents the cost of the ingredients that are used to
produce food and beverage items that are sold in the different outlets of a hotel or
restaurant. It is important that these costs are monitored and controlled accurately
as part of management’s responsibility to maximise the profits of the business.
Food Inventory and Beverage Inventory are current assets that are found in the
Balance Sheet. The value of the inventory accounts represents the food and
beverage items on hand that have not been used.

Inventory Systems
To keep track of the cost of sales and inventory accounts there are two types of
systems that can be used in the business, the Perpetual Inventory System, and the
Periodic Inventory System.

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Perpetual Inventory System

The Perpetual Inventory System constantly keeps track of food and beverage
items between delivery, storage, and production areas where they are used to
produce the food and beverage menu items that are sold to guests. The word
perpetual means to do something constantly without interruption. To enable this
system the business needs to have an administrative system in place that records
the receipts and issues of food and beverage items.

In the accounting process different accounts are affected when using the
Perpetual Inventory System. When food and beverages are delivered to the hotel,
we distinguish between storeroom purchases and direct purchases.

A storeroom purchase is when the food or beverages are delivered and moved to
the storerooms. These items are stored for later use. In this case, the asset accounts
Food Inventory and or Beverage Inventory will increase.

A direct purchase is when the food or beverages are delivered and moved directly
to the production areas in the kitchen or bar depending on the item. These items
do not go into storage and used immediately in the production of food and
beverage items. In this case, the expense accounts Cost of Food Sales and or Cost
of Beverage Sales will increase.

In the Perpetual Inventory System when food or beverages are issued from the
storerooms to the kitchen or bar it will always be recorded. The chef or barman will
have to complete a requisition form to specify exactly what is needed. The
storekeeper will count out the exact number of items requested for the chef or
barman who will then take it to the specific production area. In this case the Food
Inventory or Beverage Inventory account will decrease, and the Cost of Food Sales
or Cost of Beverage Sales accounts will increase.

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Periodic Inventory System
In the Periodic Inventory System, we do not keep track of the cost of sales or the
value of the inventories during the month. In this system the cost of sales and the
value of the inventories are calculated and recorded only periodically, that is every
once in a period, mostly on the last day of every month. This means that the
business does not have a detailed administration where the issuing of food or
beverage items are recorded, nor does it keep track of whether food or beverages
are storeroom or direct purchases.
When food and beverage items are purchased the accounts that are used to record
this in is called Food Purchases and Beverage Purchases which are seen as
expense accounts. We do not keep track of where the purchases go and therefore
storeroom and direct purchases are recorded in the same account.
In the Periodic Inventory System it is necessary to physically count all remaining
food and beverage inventory items at the end of the month to be able to calculate
the amount of food and beverages that were used during the month. To do so the
following formula is used:
Opening Food Inventory on the 1st day of the month xxxxxx
Plus Food Purchases + xxxxxx
Equals Food Available = xxxxxx
Minus Ending Food Inventory (as counted on the last day of the month) - xxxxxx
Equals Food Used (also referred to as Unadjusted Cost of Food Sales) = xxxxxx
Since some of the food that was used were not sold but used for free employee
meals, transferred to other departments, or used as complimentary meals. The cost
of these items must be deducted and added to the applicable expense accounts
that are affected. Sometimes transfers into the kitchen are made, and this must
then be added. After all these items are accounted for the result is the Cost of Food
Sales. The formula continues as follows:
Food Used xxxxxx
Minus Employee meals, Complementary meals - xxxxxx
and Transfers out of the kitchen
Plus Transfers into the kitchen + xxxxxx
Equals Cost of Food Sales = xxxxxx
(also referred to as Net Cost of Food Sales

The same calculations will be done when calculating the Cost of Beverage sales
and the relevant additional items will be accounted for to calculate the cost of
beverage sales from the cost of beverages used.

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Financial Accounting Session 5: Depreciation and Statement
of Retained Earnings

Learning Goals:

 Understand the difference between depreciation expense and

accumulated depreciation.

 Identify and apply the straight-line depreciation method.

 Identify the purpose of and understands the contents of the statement of

retained earnings.

Required Pre-session reading:

Taken from Hotel and Accounting, R. Cote, 8th Ed

Make your own handwritten study notes and write down any points or questions
you have for the class session.

Required Pre-session Assignment 1

Answer the following questions after you did the required reading:

1. Why is the “straight-line” depreciation method called as such?

2. Explain the difference between the Depreciation expense account and the
Accumulated Depreciation contra-asset account.
3. What is the meant with the book value of an asset and how is this
determined?
4. Which bookkeeping accounts will be affected if a business sells a fixed
asset?

Required Pre-session Assignment 2

Answer the following questions after you did the required reading:

1. Describe two instances where the Retained Earnings account will decrease.
2. Explain how the Statement of Retained Earnings is connected to the other
financial statements.
3. What is the difference between declaring and paying dividends?
4. Which bookkeeping accounts are affected when dividends are declared
and paid?

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FA Session 5: Required Reading

These assets, also known as fixed assets, are used in the hotel business
operations, and are expected to provide economic benefits for more than
one accounting period.
Depreciation of fixed assets is a systematic allocation of the cost of a long-
term tangible asset over its useful life. It is necessary because fixed assets
gradually lose their value or usefulness over time due to factors such as
wear and tear, obsolescence, or technological advancements. By
depreciating the asset over its useful life, it allows businesses to match the
expense of the asset with the revenue it generates during each accounting
period in line with the matching principle.

The monthly amount will be recorded for $200.

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The following video is helpful for a further explanation of some of the
concepts covered in this session:

The Statement of Retained Earnings

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Financial Accounting Session 6: The Balance Sheet

Learning Goals:

 Identify the purpose of and understand the contents of the Balance Sheet.

 Distinguish the accounts used to prepare a Balance Sheet.

 Distinguish between current and non-current assets and liabilities.

 Explain the corporate equity accounts.

Required Pre-session reading:

Taken from Hotel and Accounting, R. Cote, 8th Ed

Make your own handwritten study notes and write down any points or questions you
have for the class session.

Required Pre-session Assignment 1

Answer the following questions after you did the required reading:

1. Explain which stakeholders are interested in a business’s Balance Sheet

and why that is.
2. Explain the difference between a current and non-current asset.
3. Why is there not an Accumulated Depreciation on Glassware account in
the Balance Sheet?
4. There are two types of deposit accounts that can be found in a Balance
Sheet explain both types.
5. How do we determine if a cost is an expense or a prepaid expense?
6. Explain the difference between Sales Tax and Income Tax and in which
financial statements these accounts can be found.
7. Is it possible for a business to create goodwill and record it on its Balance
Sheet? Clearly explain your answer.
8. Explain the difference between the conversion privilege and callability of
preferred stock.
9. Name and explain three contra accounts that can be found in the Balance
Sheet.
10. Explain two reasons why a business would reacquire shares from the
owners.

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FA Session 6: Required Reading

The Balance Sheet

In hospitality accounting, the balance sheet is a financial statement that provides a
snapshot of a hospitality business's financial position at a specific point in time. It
presents the company's assets, liabilities, and shareholders' equity, also known as
the owner's equity.

The balance sheet follows the fundamental accounting equation:

Assets = Liabilities + Shareholders' Equity

The components of a Balance Sheet are as follows:

Assets: These are the resources owned by the hospitality business. They can be
classified into two categories:

a. Current assets: These are assets that are expected to be converted into cash
or used up within one year. Examples include cash, accounts receivable
(amounts owed by customers), inventory, and prepaid expenses.
b. Non-current assets: These are assets with a useful life of more than one year.
They include property and equipment (such as buildings, furniture, and
vehicles), long-term investments, and other assets such as intangible assets
like trademarks or patents.

Liabilities: These represent the obligations and debts owed by the hospitality
business. Like assets, liabilities are categorised as current and long-term:

a. Current liabilities: These are obligations that are expected to be settled within
one year. They include accounts payable (amounts owed to suppliers), short-
term loans, accrued expenses, and current portion of long-term debt.
b. Long-term liabilities: These are long-term obligations that are not due within
the next year. Examples include long-term loans and mortgages,

Stockholders' Equity (Owner's Equity): This represents the residual interest in the
assets of the hospitality business after deducting liabilities. It includes the initial
investment by the owner(s) and retained earnings, which are the accumulated
profits (or losses) over time that have not been declared as dividends.

The balance sheet provides a snapshot of the company's financial health, showing
its liquidity (ability to meet short-term obligations) and solvency (ability to meet
long-term obligations). By analysing the balance sheet, stakeholders can evaluate
a hospitality business's financial position and make informed decisions about
investments, loans, or other financial matters.
Example of a Balance Sheet:
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Financial Accounting Session 7: Accounting Cycle and
Double entry accounting

Learning Goals:

 Explain the accounting cycle.

 Understand the fundamentals of double entry bookkeeping.

 Analyse business transactions and understand their effect on the individual

accounts.

 Appling double entry bookkeeping to business transactions.

Required Pre-session reading:

Taken from Hotel and Accounting, R. Cote, 8th Ed

Make your own handwritten study notes and write down any points or questions you
have for the class session.

Required Pre-session Assignment 1

Answer the following questions after you did the required reading:

1. Name the four steps of analysing a transaction.

2. Explain the relationship between the accounting equation and the debits and
credits of double entry accounting.
3. How are transactions recorded in a hotel?
4. Explain what is meant with the following terms:
• General Journal
• Posting
• T Account
• Account balance
• General Ledger
• Trial Balance

Required Pre-session Assignment 2

Refer to Pre-session Assignment 2 of Session 1 and analyse your own three

transactions with the four steps of analysing a transaction.

Make sure to write out each of the four steps for each of your three transactions!

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FA Session 7: Required Reading
The Accounting Cycle
The accounting cycle in a hotel involves a series of steps that are followed to
record, analyse, and report the financial transactions and information of the hotel.
The accounting cycle typically spans a specific period, such as a month, quarter, or
year. Here is an overview of the accounting cycle in a hotel:
1. Business Transactions: The cycle begins with identifying and recording financial
transactions that occur in the hotel. This includes sales of rooms, food, beverages,
and other services, as well as expenses such as payroll, utilities, and supplies.
2. Analyse and Journalise Transactions: Transactions are recorded in journals.
There are different kinds of journals depending on the type of transaction. In this
course we will focus on recording transactions in the General Journal. When
transactions are recorded the accounts that are debited with the relevant amount
is listed first and then, below that the accounts with the credit entries.

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3. Post Transactions to the General Ledger: Once the transactions are recorded in
the appropriate journals, they are posted to the general ledger. The general ledger
contains individual accounts for assets, liabilities, equity, revenue, and expenses.
Posting involves transferring the debit and credit amounts from the journals to the
corresponding accounts in the General Ledger. The account balances of all
bookkeeping accounts are calculated after the transactions are posted to the
general ledger.
4. Prepare a Trial Balance: The trial balance lists all the account balances at a
specific point in time, typically at the end of an accounting period. It ensures that
the total debits equal the total credits, providing a preliminary check for accuracy.
The trial balance orders all accounts based on the account types: Asset accounts
first, followed by the Liability, Owners Equity, Revenue and the Expense accounts.
5. Prepare and Journalise Adjustments: Adjusting entries are prepared and
recorded in the General Journal at the end of the accounting period to ensure that
revenues and expenses are recognised in the appropriate period. In a hotel,
common adjusting entries may include recording accrued revenue or expenses,
prepayments, depreciation, and inventory adjustments. These entries are
necessary to reflect the correct financial position and performance of the hotel.
6. Post the Adjustments to the General Ledger: Once the adjustments are
recorded in the General Journal, they are posted to the applicable bookkeeping
accounts in the general ledger. The account balances are calculated again.
7. Prepare an Adjusted Trial Balance: After the adjusting entries have been made
and posted to the general ledger, an adjusted trial balance is prepared. This trial
balance includes the effects of the adjusting entries and is used to verify that the
accounts are in balance.
8. Prepare the Financial Statements: Based on the adjusted trial balance, the hotel
prepares financial statements, including an income statement, balance sheet, and
statement of cash flows. These statements provide an overview of the hotel's
financial performance, position, and cash flows during the accounting period.
9. Closing entries: At the end of the accounting period, closing entries are made to
transfer the temporary account balances (such as revenue and expense accounts)
to the appropriate permanent accounts. This step resets the temporary accounts
to zero in preparation for the next accounting period.
10. Post-closing Trial Balance: After the closing entries have been made, a post-
closing trial balance is prepared. It ensures that all the temporary accounts have
been closed and that only the permanent account balances remain of the assets,
liabilities and owners equity accounts.
It's important to note that the accounting cycle may vary slightly depending on the
specific accounting practices and systems implemented by a hotel. Additionally,

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larger hotels may have more complex accounting processes due to the scale and
scope of their operations.

Finally, the hotel's financial statements are analysed, and various financial ratios
and metrics are calculated to evaluate the financial performance and health of the
hotel. These reports help management make informed decisions and provide
stakeholders with information about the hotel's financial position.

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There are different contra accounts:
Contra Account Name Classification Rule of
Increase
Allowance for Doubtful Accounts Contra Asset Credit
Accumulated Depreciation on Vehicle* Contra Asset Credit
Treasury Stock Contra Equity Debit
Sales Allowances Contra Revenue Debit

*Separate Accumulated Depreciation accounts are also maintained for Equipment

and Buildings

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Financial Accounting Session 8: Trial Balances and
Adjustments

Learning Goals:

 Identify and understand preparation of the Working Trial Balance.

 Understand the application of realization and matching.

 Identify typical end of period adjustments.

 Understand the content and purpose of an Adjusted Trial Balance.

Required Pre-session reading:

Partly taken from Hotel and Accounting, R. Cote, 8th Ed

Make your own handwritten study notes and write down any points or questions you
have for the class session.

Required Pre-session Assignment 1

1. Complete the working Trial Balance of Hotel Honkball

Required Pre-session Assignment 2

Answer the following questions after you did the required reading:

1. Briefly explain the difference between cash basis and accrual basis
accounting.
2. Explain why it is necessary to do adjustment entries in the accounting cycle.
3. Which two accounting principles relate to the adjusting entries?
4. Explain what is meant with the “asset method” that is used for different
supplies that are used in a hotel.
5. Why are there two accounts called China, Glassware and Silver?
6. Why is there a bookkeeping account needed for accrued payroll?
7. When will there be no need for a bookkeeping account called accrued
payroll in the accounting record of a business?

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FA Session 8: Required Reading

The Trial Balance

After all transactions are posted to the relevant General Ledger accounts and the
accounts balances have been calculated the next step is to compile a Trial
Balance.

The purpose of a trial balance is to ensure the accuracy of the accounting records
by verifying that the total of all debits equals the total of all credits. It helps to detect
any errors or discrepancies in the general ledger before preparing financial
statements.

The trial balance includes a list of all accounts, both asset and liability accounts, as
well as equity, revenue, and expense accounts. The balances of these accounts
are listed in two columns: debit and credit.

The process of preparing a trial balance involves taking the ending balances from
the individual accounts in the general ledger and transferring them to the trial
balance. The totals of the debit and credit columns are then calculated, and if they
match, it indicates that the accounting records are in balance. However, if the totals
do not match, it suggests that there are errors in the ledger, such as incorrect
postings, omitted entries, or mathematical mistakes.

While a trial balance helps to identify errors, it does not guarantee that the financial
statements are completely accurate. There could still be errors that cancel each
other out, or certain types of errors that the trial balance cannot detect. Therefore,
it is important to investigate any discrepancies found in the trial balance before
finalising the financial statements.

The Trial Balance lists the accounts based on the order of bookkeeping account
numbers which starts with the asset accounts followed be liabilities, owners equity,
revenues and lastly the expense accounts. This sequence is useful when having to
prepare the financial statements at the end of the accounting cycle.

During the accounting cycle it is common to prepare trial balances in different

stages, namely after the transactions have been posted, after the adjusting entries
have been posted and after the closing entries have been posted.

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 Hotel Houdini
Working Trial Balance
On 31 December 20x3
DEBIT CREDIT
1 Cash 13 130
2 Accounts Receivable 11 200
3 Food Inventory 13 890
4 Beverage Inventory 4 090
5 Housekeeping Supplies Inventory 2 300
6 Office Supplies Inventory 1 650
7 Pre-paid Insurance 2 520
8 Security Deposit 3 000
9 Land 361 000
10 Building 703 000
11 Accumulated Depreciation on Building 21 000
12 Equipment 95 000
13 Accumulated Depreciation on Equipment 15 250
14 Furniture 101 200
15 Accumulated Depreciation on Furniture 9 320
16 Vehicles 21 000
17 Accumulated Depreciation on Vehicle 7 040
18 China, Glassware & Silver 12 500
19 Goodwill 50 000
20 Accounts Payable 16 565
23 Sales Tax Payable 21 000
24 Income Tax Payable 46 510
25 Advance Deposits 3 200
26 Dividends Payable 27 190
27 Current part of Long term Loan 12 000
28 Long term Loan 565 200
29 Common Stock Issued 381 000
30 Preferred Stock Issued 120 000
31 Additional Paid-in capital 125 000
32 Donated Capital 12 500
33 Retained Earnings 69 155
34 Treasury Stock 100 000
35 Room Sales 62 496
36 Room Sales Allowances 1 100
37 Food Sales 27 720
38 Beverage Sales 9 900
39 Cost of Food Sales 1 676
40 Cost of Beverage Sales 825
41 Advertising 560
45 Payroll 40 000
46 Payroll Taxes 6 000
47 Maintenance 730
48 Utilities 3 320
55 Interest 2 355
1 552 046 1 552 046

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Both types of adjustments are in accordance with either the Matching Principle
or the Revenue Recognition Principle.

Recording the Adjusting Entries

At the end of the accounting period the adjusting entries are determined to
update the financial records in accordance with the Matching and Revenue
Recognition principles. This is one of the last steps in the accounting cycle before
the financial statements are prepared.

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Consider the accounts of Houdini Hotel. The following are examples of
adjustment entries that are typical for the end of the accounting period that are
recorded in the General Journal on the 31st of December:
a. Prepaid Expenses: When expenses are prepaid for future accounting periods
they are considered and recorded as assets. Houdini Hotel bought a twelve-
month insurance policy on 1 July 20x3, the insurance cover started on the same
date. Every month an adjustment is made to show the insurance (expense) that
was incurred for the month and that the value of the prepaid insurance (asset)
is decreasing with one more month. See the General Journal of Houdini Hotel
for this adjustment. Try to work out how the amount of €360 is derived at!

b. Cost of Food Sales and Cost of Beverage Sales: In the perpetual system the
cost of food sales and cost of beverage sales are constantly recorded when
direct purchases and issues from the storerooms are made. In the case where
issues from the storerooms are manually recorded it might be necessary to
make an adjusting entry for this at the end of the month if it was not recorded
in an automated system. Please note that in the case of a manual system the
issues are always (perpetually) recorded with a paper-based requisition and
issue system and that this entry is only needed if the relevant bookkeeping
accounts are not updated yet. For example, during the month food issues from
the storeroom to the kitchen totalled €7 050 and beverage issues from the
storeroom to the bar totalled €1 650.

c. Employee Meals: the food bought as direct purchases or issued from the
storeroom to the kitchen would increase the Cost of Food Sales (expense)
account. However, not all food that was used in the kitchen was used to prepare
meals that were sold to guests. Some of the food was used to prepare
employee meals. The management must keep track of the amount of
employee meals served during the month and the Cost of Food Sales account
must be adjusted at the end of the month with this amount. For example, during
the month 350 employee meals were served at Houdini Hotel and the standard
cost to prepare one employee meals is €1,20

d. Supplies: Housekeeping Supplies or Office Supplies are frequently used in

hotels. For supplies we use the asset method to record purchases. That is, when
the supplies are bought, they are seen as assets and the applicable inventory
accounts will be increased. Houdini Hotel’s Working Trial Balance shows
Housekeeping Supplies Inventory of €2 300 and Office Supplies Inventory of €1
650 on hand. At the end of the month the manager counts the supplies that are
left over and can then calculate the amount that was used during the month
which will be recorded in the applicable expense account and the
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 corresponding asset account will be adjusted. For example, during December
€1 670 worth of Housekeeping Supplies were used and €110 for Office Supplies.

e. Recording of depreciation: We have previously covered the method for

calculating depreciation on fixed assets and the bookkeeping accounts that are
involved. Recording Depreciation are adjusting entries made at the end of the
accounting period. Houdini Hotel record depreciation on Building, Furniture,
Vehicle and Equipment, see the adjusting entries for doing so in the General
Journal.

f. Direct write-off method for China, Glassware and Silver: China, Glassware and
Silver are also non-current assets that will loose value over time. For these
assets we use the direct write-off method, this means that the loss of value of
these assets are directly taken off the value of the corresponding asset account
(decreased) and an expense account will be increased with this value. For
example, the breakages and written off China, Glassware and Silver amounted
to €230 during December at Houdini Hotel.

g. Accrued Payroll and Accrued Payroll Taxes: Payroll and Payroll taxes that are
incurred in the current accounting period must be recorded in the current
period. Often employees are paid before the last day of the month and the
payroll incurred between the pay date last day of the month will be paid on the
pay date of the next month. This part of the payroll (and payroll taxes) will accrue
to the next month which is seen as a current liability. For example, the pay date
for Houdini Hotel employees always falls on the 25th of every month. The payroll
expense for Houdini Hotel from 1 to 25 December amounts to € 40 000 and for
26 to 31 December it is € 9 600 therefore the total payroll expense for December
is € 49 600. The adjustment in this example is for the part that is incurred for the
last six days of December which will be paid in January and the associated
payroll taxes.

h. Adjusting entry for Income Tax: At the end of December the income tax for
Houdini Hotel is calculated based on the income before tax, this amounts to
€ 4 310 for the month. The Income Tax expense account will increase, and the
liability account called Income Tax Payable will increase further with the same
amount.

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 GENERAL JOURNAL of HOUDINI HOTEL
Date 20x3 Description DEBIT CREDIT
a.
Dec 31 Insurance 360
Prepaid Insurance 360

b.
Dec 31 Cost of Food Sales 7 050
Food Inventory 7 050

Cost of Beverage Sales 1650

Beverage Inventory 1650

c.
Dec 31 Employee Meals 420
Cost of Food Sales 420

d.
Dec 31 Housekeeping Supplies 1670
Housekeeping Supplies Inventory 1670

Office Supplies 110

Office Supplies Inventory 110

e.
Dec 31 Depreciation on Building 3 020
Accumulated Depreciation on Building 3 020

Depreciation on Equipment 850

Accumulated Depreciation on Equipment 850

Depreciation on Furniture 210

Accumulated Depreciation on Furniture 210

Depreciation on Vehicle 160

Accumulated Depreciation on Vehicle 160

f.
Dec 31 China, Glassware & Silver (expense) 230
China, Glassware & Silver (asset) 230

g.
Dec 31 Payroll 9 600
Accrued Payroll 9 600

Payroll Taxes 1 440

Accrued Payroll Taxes 1 440

h.
Dec 31 Income Taxes 4 310
Income Taxes Payable 4 310

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The adjustments are recorded in the General Journal and then posted to the applicable General
Ledger bookkeeping accounts. After the new account balance are calculated the Post-
adjustment Trial Balance is prepared:
Hotel Houdini
Adjusted Trial Balance
On 31 December 20x3
DEBIT CREDIT
1 Cash 13 130
2 Accounts Receivable 11 200
3 Food Inventory 6 840
4 Beverage Inventory 2 440
5 Housekeeping Supplies Inventory 630
6 Office Supplies Inventory 1 540
7 Pre-paid Insurance 2 160
8 Security Deposit 3 000
9 Land 361 000
10 Building 703 000
11 Accumulated Depreciation on Building 24 020
12 Equipment 95 000
13 Accumulated Depreciation on Equipment 16 100
14 Furniture 101 200
15 Accumulated Depreciation on Furniture 9 530
16 Vehicles 21 000
17 Accumulated Depreciation on Vehicle 7200
18 China, Glassware & Silver 12 280
19 Goodwill 50 000
20 Accounts Payable 16 565
21 Accrued Payroll 9 600
22 Accrued Payroll Taxes 1 440
23 Sales Tax Payable 21 000
24 Income Taxes Payable 50 820
25 Advance Deposits 3 200
26 Dividends Payable 27 190
27 Current part of Long term Loan 12 000
28 Long term Loan 565 200
29 Common Stock Issued 381 000
30 Preferred Stock Issued 120 000
31 Additional Paid-in capital 125 000
32 Donated Capital 12 500
33 Retained Earnings 69 155
34 Treasury Stock 100 000
35 Room Sales 62 496
36 Room Sales Allowances 1 100
37 Food Sales 27 720
38 Beverage Sales 9 900
39 Cost of Food Sales 8 306
40 Cost of Beverage Sales 2 475
41 Advertising 560
42 Employee Meals 420
43 Housekeeping Supplies 1 670
44 Office Supplies 110
45 Payroll 49 600
46 Payroll Taxes 7 440
47 Maintenance 730
48 Utilities 3 320
49 Depreciation on Building 3 020
50 Depreciation on Equipment 850
51 Depreciation on Furniture 210
52 Depreciation on Vehicle 160
53 China, Glassware & Silver (expense) 220
54 Insurance 360
55 Interest 2 355
56 Income Taxes 4 310
1 571 636 1 571 636

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Financial Account Session 9: Preparation and Analysis of
Financial Statements

Learning Goals:

 Compile an Income Statement and Balance Sheet from an adjusted trial

balance.
 Apply horizontal, vertical and trend analysis to financial statements.
 Interpret elementary financial statements and identify key business
implications.

Required Pre-session reading:

Taken from Hotel and Accounting, R. Cote, 8th Ed

Make your own handwritten study notes and write down any points or questions you
have for the class session.

Required Pre-session Assignment 1

Complete the Income Statement of Hotel Honkball, and make sure to use the
format in Exhibit 2 of FA Session 3.

Required Pre-session Assignment 2

Answer the following questions after you did the required reading:

1. How is a vertical analysis done of the Income Statement and the Balance
Sheet?
2. What is the difference between a horizontal analysis and a trend analysis?
3. Why is it important to look at both absolute and relative changes in analysing
financial statements?

Required Pre-session Assignment 3

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FA Session 9: Required Reading

Preparation of the Financial Statements

All bookkeeping accounts are up to date and adjusted for the current financial
period by the time that the Adjusted Trial Balance has been prepared. The next
step in the accounting cycle is to prepare the financial statements.
In this course we are focussing on the preparation of the Income Statement as
covered in FA session 3 and the Balance Sheet as covered in FA session 6.
As you can see in the Adjusted Trial Balance as covered in FA session 8, the
account types are grouped together as they will appear in the Balance Sheet and
Income Statement.

The Income Statement is prepared first so that the resulting Net Income can be
added to the Retained Earnings Account in the Balance Sheet.

Take the time to study the Income Statement and Balance Sheet of Hotel Honkball
that you prepared as part of the in-class handouts over the past few sessions.

You can see that all the steps in the Accounting Cycle so far contributed to the
resulting financial statements. The Income Statement show the performance of the
Hotel Houdini for the year ended on 31 December and the Balance Sheet shows
the financial position at the end of the year on 31 December.

We will now look at a bit more detail in the resulting Financial Statements by
analysing them further.

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Financial Accounting Session 10: Internal Controls and
Accountability

Learning Goals:

 Understand the purpose and use of basic internal controls.

 Value the function that financial reporting plays in facilitating corporate
accountability.
 Describe how accounting can help keep companies, departments, and
employees responsible for their actions.

Required Pre-session reading:

Taken from Hospitality Managerial Accounting, R. Schmidgall, 8th Ed

Make your own handwritten study notes and write down any points or questions you have
for the class session.

Required Pre-session Assignment 1

Answer the following questions after reading the required reading:

1. How can companies prevent the “failure of conscience” with staff members in
order to prevent fraud and theft?
2. Explain how the internal control objective of Safeguarding Assets can influence
the financial performance of a hotel if it I not adhered to.
3. Explain how the internal control objective of Safeguarding Assets can influence
the financial position of a hotel if it I not adhered to.
4. Describe three examples where managers can have a direct influence on how
well internal controls are achieved or not.
5. What is meant with “segregating duties”?
6. Describe two examples of how a hotel can segregate duties.
7. Describe how Internal Auditing helps to improve Internal Control.

Required Pre-session Assignment 2

Listen to the podcast: “A real case of Fraud” you can find the link with the QR code
below:
Answer the following questions after you listened to the podcast:

1. Which of the three conditions for fraud were clearly

present?
2. Identify five characteristics of Internal Control that were
lacking.
3. Give advice on what the owner can do to improve each of
the five characteristics that you identified in the previous
question.
4. Describe the consequences of the fraud that was
committed for the business and its stakeholders.

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FA Session 10: Required Reading

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Managerial Accounting

Sessions 1 – 6

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Managerial Accounting Session 1: The Uniform System of
Accounts for the Lodging Industry (USALI)

Learning Goals:

 Explain USALI formatted statements and schedules.

 Recognise the contribution of USALI formatted statements and

schedules for internal use.

 Use the departmental schedules of a hospitality company to analyse

departmental performance and explain how it links to the summary
income statement.

Required Pre-session reading:

Taken from Hospitality Managerial Accounting, R. Schmidgall, 8th Ed

Make your own handwritten study notes and write down any points or questions you have
for the class session.

Required Pre-session Assignment 1

Answer the following questions after reading the required reading:

1. Describe three advantages for a hotel in using USALI.

2. What is meant with “responsibility accounting”?
3. Name the three sections of a USALI Summary Income Statement.
4. What are the five levels of profit measured in a USALI Summary Income
Statement?
5. Explain the difference between the hotel departments that are listed in the first
and second sections of a USALI Summary Income Statement.
6. Explain the difference between expenses that are listed in the second and third
sections of a USALI Summary Income Statement.
7. What are departmental schedules?
8. Who are the primary users of departmental schedules?
9. How do departmental schedules relate to the USALI Summary Income
Statement?

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MA Session 1: Required Reading

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Managerial Accounting Session 2: Ratio Analysis at a
company and departmental level

Learning Goals:

 Use the departmental schedules of a hospitality company to analyse

departmental performance and explain how it links to the summary
income statement.

 Recognize the function and purpose of ratio analysis.

 Understand and apply key financial accounting ratios.

 Interpret the results by making comparisons and assessing relevance.

Required Pre-session reading:

Taken from Hospitality Managerial Accounting, R. Schmidgall, 8th Ed

Make your own handwritten study notes and write down any points or questions
you have for the class session.

Required Pre-session Assignment 1

Answer the following questions after reading the required reading:

1. Describe the three standards that ratios results are compared to.
2. Describe three different user groups of ratio analysis and what the
purpose ratio analysis is for every user group.
3. When is it appropriate to use average values in ratio analysis?
4. Which ratios will use average values instead of ending balance values?
5. Compile a list of the seventeen ratios that are covered in this session and
add the correct formula for each of them.

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MA Session 2: Required Reading

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Managerial Accounting Session 3: Basic Cost Concepts

Learning Goals:

 Distinguish fixed, variable, step, mixed and total costs.

 Recognise the relationship of costs to volume of sales.

 Recognise the methods of splitting mixed costs.

Required Pre-session reading:

Taken from Hospitality Managerial Accounting, R. Schmidgall, 8th Ed

Make your own handwritten study notes and write down any points or questions you
have for the class session.

Required Pre-session Assignment 1

Answer the following questions after reading the required reading:

1. Explain why is it important for managers to know the different types of

costs and how they change?

2. Describe the following types of costs:

• Fixed Costs
• Variable Costs
• Step Costs
• Mixed Costs

3. What is the difference between Capacity Fixed Costs and Discretionary

Fixed Costs?

4. What are the three methods of splitting mixed costs?

5. Which method is the least accurate method to split mixed costs and
why is this method less accurate?

6. Which method is the most accurate method to split mixed costs and
why is this method the most accurate?

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MA Session 3: Required Reading

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The following video is helpful for further explanation of some of the
concepts covered in this session:

Splitting Mixed Costs

Make sure that you are logged in on Microsoft Office with your
hotelschool user account to go directly to the video

162
Managerial Accounting Session 4 & 5: Cost-Volume-Profit
Analysis

The coming two sessions will be used to cover CVP Analysis. Your lecturer will indicate what reading
and pre-session assignments to prepare for each session!

Learning Goals:

 Define what Cost-Volume-Profit analysis is and its limitations and

assumptions.

 Apply the Cost-Volume-Profit analysis to single product lines.

Required Pre-session reading:

Taken from Hospitality Managerial Accounting, R. Schmidgall, 8th Ed

Make your own handwritten study notes and write down any points or questions you
have for the class session.

Required Pre-session Assignment 1

Answer the following questions after reading the required reading:

1. Why is it useful for managers to know the CVP analysis tool?

2. What is the breakeven point?
3. How are mixed costs dealt with in CVP analysis?
4. How are undistributed operating expenses dealt with in CVP analysis?
5. What does it mean if a cost is linear to revenue and if revenue is linear to
volume?
6. What is a sensitivity analysis?
7. What is the CVP formula at breakeven point?

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Required Pre-session Assignment 2

Jack has a hotdog truck and sells hotdogs at € 5,00 each. The cost of sales for
a hotdog is € 2,00 and the packaging and serviettes are € 0,35 per hotdog. The
monthly fixed costs are € 2 300.

1. Calculate the CM of a hotdog.

2. Calculate the CMR of a hotdog.
3. Calculate the number of hotdogs that Jack has to sell each month to
break even.

Jack invested his personal savings of € 84 600 in the hotdog truck and would
like to earn a yearly ROE of 20%.
4. What should the monthly profit be to achieve this required ROE?
5. How many hotdogs must Jack sell per day to achieve the required ROE
if the hotdog truck is open for 25 days per month?

Because of inflation the cost of sales for a hotdog is expected to increase to €

2,15 and the packaging and serviettes to € 0,40 per hotdog. Luckily the
monthly fixed costs remain the same for the coming period, but Jack does not
want to increase the selling prices yet.

1. Calculate the revised CM of a hotdog.

2. Calculate the revised CMR of a hotdog.
3. Calculate the revised number of hotdogs that Jack has to sell each
month to break even.

Required Pre-session Assignment 3

In the Skotel there is a vending machine that sells energy drinks. The rental and
other fixed costs for the machine is €850 per month. The cost of an energy drink is
€0,70 and is sold at €3,50.

1. Calculate the CMR of an energy drink.

2. Calculate the amount of energy drinks that must be sold per month to
achieve a profit of € 900.
3. Calculate the amount of profit that will be made if the vending machine sells
700 drinks per month.

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Managerial Accounting Session 4&5 : Required Reading

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The following video is helpful for further explanation of some of the
concepts covered in this session:

CVP Analysis

Make sure that you are logged in on Microsoft Office with your
hotelschool user account to go directly to the video

174
Managerial Accounting Session 6: Operating Leverage

Learning Goals:

 Define operating leverage of a business and its impact.

 Recognise the relationship of operating leverage with business risk.

Required Pre-session reading:

Taken from Hospitality Managerial Accounting, R. Schmidgall, 8th Ed

Make your own handwritten study notes and write down any points or questions you
have for the class session.

Required Pre-session Assignment 1

Answer the following questions after reading the required reading:

1. Give a definition for Operating Leverage.

2. Why do hotels with high operating leverage have higher risks than hotels
with lower leverage? Explain this by making use of an example.

3. Why is it important for a hotel manager to understand the difference

between high and low operating leverage and to have an idea of their
own hotel’s operating leverage?

4. Give three specific examples of how to decrease the operating leverage

for a hotel.

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MA Session 6: Required Reading

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Food and Beverage
Cost Accounting

Sessions 1 – 4

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Food & Beverage Cost Accounting Session 1 & 2: Food service
cost controls
The coming two sessions will be used to cover Food service cost controls. Your lecturer will indicate
what reading and pre-session assignments to prepare for each session!

Learning Goals:

 Recognise how a system of food service control points helps managers carry out critical
functions on a daily basis.

 Distinguish the five standard cost control tools.

 Determine standard yields for food products and recognises the cost per servable
amount.

 Calculate standard portion costs and standard menu item costs for food items based
on standard recipes and standard portion sizes.

Required Pre-session reading:

Taken from:

Planning and Control for Food and Beverage Operation, J. Ninemeier, 9th Ed
Food and Beverage Cost Control, L. Dopson and D.K. Hayes, 6th Ed

Make your own handwritten study notes and write down any points or questions
you have for the class session.

Required Pre-session Assignment 1

Answer the following questions after reading the required reading:

1.1 What makes the job of a food service (F&B) manager more complicated than
that of managers working in other industries or departments?

1.2 Explain why the menu is the starting point for F&B managers in planning and
control.

1.3 How can the choice of menu items influence the profitability of a hotel or
restaurant?

1.4 What are the marketing implications in menu planning?

1.5 What points can F&B managers consider to control costs better in planning
menus?

1.6 Looking at the control points in F&B operations, explain which steps will have
an impact on the accounting equation and bookkeeping accounts.

1.7 What are the advantages of using sub-recipes in standard recipes?

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Required Pre-session Assignment 2

Answer the following questions after reading the required reading:

2.1 What are standard recipes?

2.2 What are some advantages of using standard recipes?
2.3 What are some disadvantages of using standard recipes.

2.4 What are standard purchase specifications?

2.5 Explain two ways in which the use of Standard Purchase Specifications
can help to reduce the cost of sales for a restaurant.

2.6 What are some disadvantages of using standard purchase specifications?

2.7 What are standard yields?

2.8 Why is it important to know what the standard yields are?
2.9 What is a yield test and how is it performed?

2.10 Why are standard portion sizes important in F&B operations?

2.11 How do we ensure standard portion sizes are maintained?

2.12 What are standard portion costs?

2.13 How are standard portion costs calculated?
2.14 Why is it important to know the standard portion costs?

182
F&B Session 1 & 2: Required Reading
Introduction to Food and Beverage Cost Accounting
In this section of FFM we are now switching to Food and Beverage Cost Accounting. We
will explore the accounting and management controls for the Food and Beverage
departments in more detail. We will look at the unique characteristic of Food and Beverage
operations and which measures are specifically needed to control costs, maximize
revenues and ultimately the profitability.

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Food & Beverage Cost Accounting Session 3: Selling Prices of
Menu items

Learning Goals:
 Understand the basis for calculating menu item selling prices.
 Apply base selling price calculation for menu items using the ingredients mark-
up pricing method and the contribution margin method.
 Identify important pricing considerations that affect the final selling price of
menu items.

Required Pre-session reading:

Taken from:

Planning and Control for Food and Beverage Operation, J. Ninemeier, 9th Ed

Make your own handwritten study notes and write down any points or questions
you have for the class session.

Required Pre-session Assignment 1

1. Answer the following questions after reading the required reading:

2. How does the use of standard recipes ensure that selling prices are
accurately established?
3. What is “value” as determined by the guest and give an example of how this
can affect the selling prices of menu items.
4. Consider the ingredients mark-up method and the contribution margin pricing
method and formulate two disadvantages of each method.
5. Explain what price elasticity of demand is and how it is calculated.
6. Explain how price elasticity of demand can affect price changes.

Required Pre-session Assignment 2

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F&B Session 3: Required Reading

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Food & Beverage Cost Accounting Session 4: Menu
Engineering

Learning Goals:
 Distinguish between menu items using popularity and profitability
measurements.

 Manage the menu items to improve overall menu profitability.

Required Pre-session reading:

Taken from:

Planning and Control for Food and Beverage Operation, J. Ninemeier, 9th Ed

Make your own handwritten study notes and write down any points or questions
you have for the class session.

Required Pre-session Assignment 1

Answer the following questions after reading the required reading:

1.1 What is menu engineering?

1.2 What information is needed to perform menu engineering.

1.3 How is profitability defined in menu engineering?

1.4 How is popularity defined in menu engineering?

1.5 What is the difference between Menu Mix % and Sales Mix %?

1.6 Is it possible for all items on a menu to reach “Star” status in menu

engineering?

1.7 Why should managers be careful to just automatically increase selling prices

of items with low profitability?

1.8 Describe three examples of what a manager can do to increase the popularity

of menu items.

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 Required Pre-session Assignment 2

The manager at the Gold Star Restaurant would like to improve the revenue generated on
Tuesdays which is normally quiet. He implemented a special offer where customers can
order any of the pizzas for €9,95:

After the first month of running the special he conducts a menu engineering analysis with the
following result:

Menu Item: Category:

Margherita Pizza Star
Pepperoni Pizza Star
Hawaiian Pizza Puzzle
Calzone Pizza Dog
Four Cheeses Pizza Plowhorse

2. The manager does not want to change the selling price of any of the pizzas in the special
offer. Give him five points of advice based on the outcome of the menu engineering analysis.

Required Pre-session Assignment 3

The table below shows the information of the main meals sold during dinner at a restaurant
during January 2022. The restaurant was open for 25 days.
Number Item Item
of Items Menu Item Food Food Selling Item
Menu Item Sold Mix % Cost Cost % Price CM
Entrecote Steak 219 €8,12 €24,45
Truffle Risotto 196 €6,20 €22,25
Sea Bass 163 €8,65 €24,45
Vegetable Lasagne 147 €5,15 €18,75

3.1 Complete the empty columns in the table above with the missing values.
3.2 Which menu item contributed best to the total revenue of the restaurant?
3.3 Which item contributed best to the total profitability of the restaurant?
3.4 How many main meals did the restaurant sell per night?
3.5 Which menu item should the waiters recommend if a guest is not sure what to order?

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F&B Session 4: Required Reading

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