Food Service Chapter 17

The Income Statement

Also called a Profit and Loss Statement (P & L), shows whether the business made or lost money during the period being reported. (Gross profit/net profit, cost of goods sold, labor cost, operating expenses,) 30, 30, 30, 10 rule.

Branches of Accounting (2)

- Cost Accounting - Recording, classifying, reporting business expenses. - Tax Accounting - accurate and timely filing of tax forms, payments, and documents required by government (Food service - Income tax, sales tax, payroll tax, etc.) - Auditing - Concerned with truthfulness and accuracy of financial reports. - Managerial Accounting - Transactions are recorded and analyzed for managerial use.

Branches of Accounting (1)

- Financial accounting - Revenue - Money taken in - Expense - Cost to operate business - Profit - Assets - Items owned by the business - Liabilities - Amounts the business owes - Owner's equity = Assets - Liabilities

Pricing Factor

100% (total sales)/ preferred food % (ex. 30%)

Budgeting

A budget is based on factual data from past records of income, resource expenditures, and business volume.

Accounting Formula

Assets = Liabilities + Equity

Avg. customer check

Avg. customer check = Total sales/ # guests served

Avg. food inventory

Avg. food inventory = (Beginning food inventory + ending food inventory)/2

Beverage Cost %

Beverage Cost % = Cost of beverage sold/ beverage sales

Food cost per patient or student

Food Cost $ / # of patients/students

Food Cost %

Food Cost % = cost of food sold/ food sale

Benchmarks to know you are making money in ratio to your sales

Food cost - 30% Labor cost - 30% Operating expenses - 30% Profit - 10%

Food inventory turnover

Food inventory turnover = Cost of food sold/ Price of Avg. food inventory

Sales Mix

Frequency in which menu items are selected (influence realistic menu prices)

Balance Sheet

Health of business on a given DAY

Operating

How successful is the organization in generating revenues and in controlling expenses?

Income Statement

Includes revenue, expenses, and net income over a PERIOD OF TIME

Selling Price

Item Food Cost x Pricing Factor

Labor Cost %

Labor Cost % = cost of labor (salaries, wages, benefits)/ total sales

Uniform System of Accounts

Most large operations will have a separate accounting department. (example: Foodservice manager/GM/F&B Manager and CFO)

Profit margin

Profit margin = Net Profit/Sales

Return on assets

Return on assets = Net profit/ total assets

Return on equity

Return on equity = Net profit/ equity

Seat turnover

Seat turnover = covers served/ # seats

Cash budget

Shows the amount of cash on hand that can be physically used to pay expenses

The Balance Sheet

The balance sheet is a listing of assets, liabilities, and capital of an operation as of a specific date. Focuses on the value of the business as a whole. Are financial goals being met?

Accounting

The tracking of financial transactions in an organization. Financial reports summarized for users.

Ratio Analysis

Used to compare present performance to previous time periods

Zero based budget

each year, the budget is cleared. Manager is forced to evaluate each dept. and figure out the projected budget.

Revenue Budget

estimate anticipated income and projected sales

Statistics budget

estimates volume of sales

Master Budget

every aspect of operations (cash, sales, labor, etc.)

Profitability

how effective is management in generating sales, controlling expenses, and providing a profit? Higher the better.

Operating budget

includes revenues and expenses, but for forecasting sales, expenses, and profit for a time period (yearly)

Flexible budget

more room for spending and is based on volume

Capital budget

prediction of capital costs

Fixed budget (tight budget)

set and can be based on last years budget. Relates to facilities that do not have a lot of revenue (for example: govt., school district)