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)
