Rosewood Hotels & Resorts

Assistant Controller Training

CHAE Study Guide Review
Chapter 1.1

Introduction to Accounting
Accounting is a process…
 Identifying
 Measuring

 Communicating

For the purpose of decision making

Branches of Accounting
Financial Historic

Financial statement preparation

Cost Calculation
and allocation of costs
Helps management control operations

Managerial Timely feedback to management

Information for decision making

Enhances controls

Tax Planning and strategy

Preparing tax returns

Auditing* Evaluationof controls and records

Gives an opinion on management’s financial
statements
 Organizations Influencing
Hospitality Accounting
 Securities & Exchange Commission (SEC)
 Internal Revenue Service (IRS)
 Financial Accounting Standards Board (FASB)
 American Institute of Certified Public Accountants
(AICPA)
 International Accounting Standards Board (IASB)
 Hospitality Financial & Technology Professionals (HFTP)
 Forms of Business Organization
 Sole Proprietorships
 Easy to form

 No liability protection

 Partnerships
 Easy to form
 Requires at least 2 partners
 Partners have unlimited liability
 Limited Partnerships
 Must have at least 1 General Partner
 Limited partners limited to their own actions
 Common for professional practices
 Partnership not subject to income tax
 Income allocated to partners
 Partners taxed regardless of cash distributions
 Forms of Business Organization
 Limited Liability Companies
 Owners are called “members”
 Can have any number of members
 Members protected from liability
 Ownership can be easily transferred
 Tax treatment is same as partnerships
 Corporations
 Ownership is easily transferred
 Extensive capital can be raised through public sale of shares
 Shareholders are protected from liability
 Shareholders are subject to “double taxation”
 Corporation is taxed
 Dividends to shareholders are taxed
 Forms of Business Organization
 Limited Liability Companies
 Owners are called “members”
 Can have any number of members
 Members protected from liability
 Ownership can be easily transferred
 Can be treated as a Partnership or Corporation for taxes
 Corporations
 Ownership is easily transferred
 Shareholders are protected from liability
 Shareholders are subject to “double taxation”
 Corporation is taxed
 Dividends to shareholders are taxed
 S Corporations
 Limited to 100 domestic shareholders
 Principles of Accounting
Cost Transactions recorded at historic amounts
Business Entity Separate accounts and records by legal entity
Going Concern Assumes the business will continue into the future
Unit of Measurement Statements are expressed in a currency unit
Objective Evidence Transactions are supported by appropriate
documentation.
Full Disclosure Statements present all know relevant information.
Consistency Accounting methods are used consistently.
Matching Revenues and related expenses are recorded in the
same period
Conservatism Recognize expenses as soon as known; delay
recognition of revenues until ensured.
Materiality Cause a user to have a different understanding of
financial results.
 Overview of Financial Statements

- Balance Sheet
- Income Statement
- Statement of Cash Flows

 Cash VS Accrual Accounting

- Cash Basis Accounting

 Overview of Financial Statements
Balance Sheet
 Financial position at one point in time

 Assets - Liabilities = Owner Equity

Income Statement
 Results of operations over a period of time
 Revenues – Expenses = Profit
Statement of Cash Flows
 In flow and out flow of cash

 Direct and Indirect Methods

 Methods of Accounting
Cash Basis
 Transactions recognized when cash received or

paid.
 Is not GAAP!

Accrual Basis
 Recognizes transactions in the period they occur
 Revenues: When earned
 Expenses: When incurred
 Requires periodic adjusting entries
 Methods of Accounting
Cash Basis
 Transactions recognized when cash received or

paid.
 Is not GAAP!

Accrual Basis
 Recognizes transactions in the period they occur
 Revenues: When earned
 Expenses: When incurred
 Requires periodic adjusting entries
Fundamental Accounting Equation
Assets - Liabilities = Owner Equity