David K. Hayes, PhD, has taught hospitality courses at Purdue University, Texas Tech University, The University of Houston, and Lansing Community College. He has served as the Vice President of Broadcast and Video Training for the American Hotel & Lodging Educational Institute. Jack D. Ninemeier, PhD, is an Emeritus Professor in the School of Hospitality Business at Michigan State University. He has many years’ experience developing and providing training and resource materials for commercial and non-commercial foodservice operations. He has also written several hundred articles for trade journals and created training monographs. Part of Wiley’s Foodservice Operations: The Essentials series.

• Preface ixAcknowledgments xiiiDedication xv1 Fundamentals of Accounting and Financial Management 1Professional Accounting 2Accounting for Effective Financial Management 3Accounting Specializations 5Users of Accounting Information 10The Uniform System of Accounts for Restaurants (USAR) 11Generally Accepted Accounting Principles (GAAP) 13The Mechanics of Financial Management 20Bookkeeping 20Summary Accounting 21Financial Analysis 21Ethics in Accounting 222 The Mechanics of Accounting 27Recording Business Transactions 28The Basic Accounting Equation 29Accounts Used in the Basic Accounting Equation 31Asset Accounts 32Liability Accounts 33Owners’ Equity Accounts 34Revenue and Expense Accounts 35Recording Changes to the Basic Accounting Equation 37Double- Entry Accounting 38The Journal and General Ledger 39Credits and Debits 40Security of Financial Data 483 The Income Statement 55The Importance of the Income Statement 56Users of the Income Statement 59Frequency of Income Statement Preparation 63USAR Income Statement Format 64Sales (Revenue) 65Total Cost of Sales 66Total Labor 68Prime Cost 70Other Controllable Expenses 71Non- Controllable Expenses 75Profits (Income) 77Ebitda 78Utilizing the Income Statement 80Supporting Schedules 80Comparative Analysis 814 The Balance Sheet 88The Importance of the Balance Sheet 89Users of the Balance Sheet 90Limitations of the Balance Sheet 94USAR Balance Sheet Format 95Assets 95Liabilities and Owners’ Equity 104Analysis of the Balance Sheet 107Ratio Analysis 107Vertical Analysis 1145 The Statement of Cash Flows 120The Importance of Cash Flow 121Sources and Uses of Funds 125Creating the Statement of Cash Flows 131Cash Flow from Operating Activities 133Cash Flow from Investing Activities 138Cash Flow from Financing Activities 139Net Changes in Cash 140Supplementary Schedules 142Statement of Cash Flows Analysis 1456 Understanding Costs and Break- even Analysis 150The Importance of Understanding Costs 151Types of Costs 152Fixed and Variable Costs 153Mixed Costs 156Step Costs 163Direct and Indirect (Overhead) Costs 164Controllable and Non- Controllable Costs 165Other Types of Costs 166Break-even Analysis 170Computation of Break- even Point 1727 Profitable Pricing 181Pricing for Profits 182The Importance of Price 182The Operator’s View of Price 183The Guest’s View of Price 184Factors Affecting Menu Pricing 185Economic Conditions 186Local Competition 187Level of Service 187Type of Guest 188Product Quality 188Portion Size 189Delivery Method 190Meal Period 191Location 191Bundling 192Methods of Food and Beverage Pricing 194Cost-based Pricing 194Contribution Margin- based Pricing 197Evaluation of Pricing Efforts 199Menu Engineering 199Calculating Popularity (Number Sold) 199Calculating Weighted Contribution Margin 200Menu Modifications 2038 Food and Beverage Cost Control 207The Importance of Food and Beverage Cost Control 208Sales Forecasts 209Standardized Recipes 212Purchasing and Receiving Products 214Purchasing Food and Beverage Products 214Receiving Products 218Managing Inventory and Production 223Placing Products in Storage 223Maintaining Product Security 225Managing Production 226Controlling the Cost of Sales Percentage 228Controlling Food Costs 228Controlling Beverage Costs 229Optimizing Cost of Sales 2319 Labor Cost Control 238The Importance of Labor Cost Controls 239Total Labor Costs 239Factors Affecting Total Labor Costs 241Accounting for Total Labor Costs 246Types of Labor Costs 247Accounting for Labor Costs 247Assessment of Total Labor Costs 251Sales per Labor Hour 252Labor Dollars per Guest Served 25310 Operating Budgets 263The Importance of Operating Budgets 264Types of Operating Budgets 264Advantages of Operating Budgets 265Creating an Operating Budget 266Revenue Forecasts 268Expense Forecasts 270Monitoring the Operating Budget 276Comparing Planned Results to Actual Results 277Modifying the Operating Budget 28311 Cash and Revenue Control 288The Importance of Revenue Control 289External Threats to Revenue Security 290Internal Threats to Revenue Security 291Developing a Revenue Security Program 296Objectives of Internal Revenue Control 296Elements of Internal Revenue Control Systems 297Implementing and Monitoring a Revenue Security Program 299Verification of Product Issues 300Verification of Guest Charges 302Verification of Sales Receipts 303Verification of Sales Deposits 303Verification of Accounts Payable (AP) 30512 Accounting for Fixed and Other Assets 310Accounting for Fixed Assets 311Recording Fixed Asset Purchases 312Depreciating Fixed Assets 314Straight-Line Depreciation 314Double Declining Balance Depreciation 315Other Issues Related to Fixed Assets 317Uniforms, Linens, China, Glass, Silver, and Utensils 317Disposal of Fixed Assets 318Exchange of Fixed Assets 319Accounting for Other Assets 321Choosing Professional Accounting Assistance 322Monitoring Evolving Accounting Issues 327Glossary G-1Index I-1

David K. Hayes, PhD, has taught hospitality courses at Purdue University, Texas Tech University, The University of Houston, and Lansing Community College. He has served as the Vice President of Broadcast and Video Training for the American Hotel & Lodging Educational Institute. Jack D. Ninemeier, PhD, is an Emeritus Professor in the School of Hospitality Business at Michigan State University. He has many years’ experience developing and providing training and resource materials for commercial and non-commercial foodservice operations. He has also written several hundred articles for trade journals and created training monographs. Part of Wiley’s Foodservice Operations: The Essentials series.

• Preface ixAcknowledgments xiiiDedication xv1 Fundamentals of Accounting and Financial Management 1Professional Accounting 2Accounting for Effective Financial Management 3Accounting Specializations 5Users of Accounting Information 10The Uniform System of Accounts for Restaurants (USAR) 11Generally Accepted Accounting Principles (GAAP) 13The Mechanics of Financial Management 20Bookkeeping 20Summary Accounting 21Financial Analysis 21Ethics in Accounting 222 The Mechanics of Accounting 27Recording Business Transactions 28The Basic Accounting Equation 29Accounts Used in the Basic Accounting Equation 31Asset Accounts 32Liability Accounts 33Owners’ Equity Accounts 34Revenue and Expense Accounts 35Recording Changes to the Basic Accounting Equation 37Double- Entry Accounting 38The Journal and General Ledger 39Credits and Debits 40Security of Financial Data 483 The Income Statement 55The Importance of the Income Statement 56Users of the Income Statement 59Frequency of Income Statement Preparation 63USAR Income Statement Format 64Sales (Revenue) 65Total Cost of Sales 66Total Labor 68Prime Cost 70Other Controllable Expenses 71Non- Controllable Expenses 75Profits (Income) 77Ebitda 78Utilizing the Income Statement 80Supporting Schedules 80Comparative Analysis 814 The Balance Sheet 88The Importance of the Balance Sheet 89Users of the Balance Sheet 90Limitations of the Balance Sheet 94USAR Balance Sheet Format 95Assets 95Liabilities and Owners’ Equity 104Analysis of the Balance Sheet 107Ratio Analysis 107Vertical Analysis 1145 The Statement of Cash Flows 120The Importance of Cash Flow 121Sources and Uses of Funds 125Creating the Statement of Cash Flows 131Cash Flow from Operating Activities 133Cash Flow from Investing Activities 138Cash Flow from Financing Activities 139Net Changes in Cash 140Supplementary Schedules 142Statement of Cash Flows Analysis 1456 Understanding Costs and Break- even Analysis 150The Importance of Understanding Costs 151Types of Costs 152Fixed and Variable Costs 153Mixed Costs 156Step Costs 163Direct and Indirect (Overhead) Costs 164Controllable and Non- Controllable Costs 165Other Types of Costs 166Break-even Analysis 170Computation of Break- even Point 1727 Profitable Pricing 181Pricing for Profits 182The Importance of Price 182The Operator’s View of Price 183The Guest’s View of Price 184Factors Affecting Menu Pricing 185Economic Conditions 186Local Competition 187Level of Service 187Type of Guest 188Product Quality 188Portion Size 189Delivery Method 190Meal Period 191Location 191Bundling 192Methods of Food and Beverage Pricing 194Cost-based Pricing 194Contribution Margin- based Pricing 197Evaluation of Pricing Efforts 199Menu Engineering 199Calculating Popularity (Number Sold) 199Calculating Weighted Contribution Margin 200Menu Modifications 2038 Food and Beverage Cost Control 207The Importance of Food and Beverage Cost Control 208Sales Forecasts 209Standardized Recipes 212Purchasing and Receiving Products 214Purchasing Food and Beverage Products 214Receiving Products 218Managing Inventory and Production 223Placing Products in Storage 223Maintaining Product Security 225Managing Production 226Controlling the Cost of Sales Percentage 228Controlling Food Costs 228Controlling Beverage Costs 229Optimizing Cost of Sales 2319 Labor Cost Control 238The Importance of Labor Cost Controls 239Total Labor Costs 239Factors Affecting Total Labor Costs 241Accounting for Total Labor Costs 246Types of Labor Costs 247Accounting for Labor Costs 247Assessment of Total Labor Costs 251Sales per Labor Hour 252Labor Dollars per Guest Served 25310 Operating Budgets 263The Importance of Operating Budgets 264Types of Operating Budgets 264Advantages of Operating Budgets 265Creating an Operating Budget 266Revenue Forecasts 268Expense Forecasts 270Monitoring the Operating Budget 276Comparing Planned Results to Actual Results 277Modifying the Operating Budget 28311 Cash and Revenue Control 288The Importance of Revenue Control 289External Threats to Revenue Security 290Internal Threats to Revenue Security 291Developing a Revenue Security Program 296Objectives of Internal Revenue Control 296Elements of Internal Revenue Control Systems 297Implementing and Monitoring a Revenue Security Program 299Verification of Product Issues 300Verification of Guest Charges 302Verification of Sales Receipts 303Verification of Sales Deposits 303Verification of Accounts Payable (AP) 30512 Accounting for Fixed and Other Assets 310Accounting for Fixed Assets 311Recording Fixed Asset Purchases 312Depreciating Fixed Assets 314Straight-Line Depreciation 314Double Declining Balance Depreciation 315Other Issues Related to Fixed Assets 317Uniforms, Linens, China, Glass, Silver, and Utensils 317Disposal of Fixed Assets 318Exchange of Fixed Assets 319Accounting for Other Assets 321Choosing Professional Accounting Assistance 322Monitoring Evolving Accounting Issues 327Glossary G-1Index I-1

David K. Hayes, PhD, has taught hospitality courses at Purdue University, Texas Tech University, The University of Houston, and Lansing Community College. He has served as the Vice President of Broadcast and Video Training for the American Hotel & Lodging Educational Institute. Jack D. Ninemeier, PhD, is an Emeritus Professor in the School of Hospitality Business at Michigan State University. He has many years’ experience developing and providing training and resource materials for commercial and non-commercial foodservice operations. He has also written several hundred articles for trade journals and created training monographs. Part of Wiley’s Foodservice Operations: The Essentials series.

• Preface ixAcknowledgments xiiiDedication xv1 Fundamentals of Accounting and Financial Management 1Professional Accounting 2Accounting for Effective Financial Management 3Accounting Specializations 5Users of Accounting Information 10The Uniform System of Accounts for Restaurants (USAR) 11Generally Accepted Accounting Principles (GAAP) 13The Mechanics of Financial Management 20Bookkeeping 20Summary Accounting 21Financial Analysis 21Ethics in Accounting 222 The Mechanics of Accounting 27Recording Business Transactions 28The Basic Accounting Equation 29Accounts Used in the Basic Accounting Equation 31Asset Accounts 32Liability Accounts 33Owners’ Equity Accounts 34Revenue and Expense Accounts 35Recording Changes to the Basic Accounting Equation 37Double- Entry Accounting 38The Journal and General Ledger 39Credits and Debits 40Security of Financial Data 483 The Income Statement 55The Importance of the Income Statement 56Users of the Income Statement 59Frequency of Income Statement Preparation 63USAR Income Statement Format 64Sales (Revenue) 65Total Cost of Sales 66Total Labor 68Prime Cost 70Other Controllable Expenses 71Non- Controllable Expenses 75Profits (Income) 77Ebitda 78Utilizing the Income Statement 80Supporting Schedules 80Comparative Analysis 814 The Balance Sheet 88The Importance of the Balance Sheet 89Users of the Balance Sheet 90Limitations of the Balance Sheet 94USAR Balance Sheet Format 95Assets 95Liabilities and Owners’ Equity 104Analysis of the Balance Sheet 107Ratio Analysis 107Vertical Analysis 1145 The Statement of Cash Flows 120The Importance of Cash Flow 121Sources and Uses of Funds 125Creating the Statement of Cash Flows 131Cash Flow from Operating Activities 133Cash Flow from Investing Activities 138Cash Flow from Financing Activities 139Net Changes in Cash 140Supplementary Schedules 142Statement of Cash Flows Analysis 1456 Understanding Costs and Break- even Analysis 150The Importance of Understanding Costs 151Types of Costs 152Fixed and Variable Costs 153Mixed Costs 156Step Costs 163Direct and Indirect (Overhead) Costs 164Controllable and Non- Controllable Costs 165Other Types of Costs 166Break-even Analysis 170Computation of Break- even Point 1727 Profitable Pricing 181Pricing for Profits 182The Importance of Price 182The Operator’s View of Price 183The Guest’s View of Price 184Factors Affecting Menu Pricing 185Economic Conditions 186Local Competition 187Level of Service 187Type of Guest 188Product Quality 188Portion Size 189Delivery Method 190Meal Period 191Location 191Bundling 192Methods of Food and Beverage Pricing 194Cost-based Pricing 194Contribution Margin- based Pricing 197Evaluation of Pricing Efforts 199Menu Engineering 199Calculating Popularity (Number Sold) 199Calculating Weighted Contribution Margin 200Menu Modifications 2038 Food and Beverage Cost Control 207The Importance of Food and Beverage Cost Control 208Sales Forecasts 209Standardized Recipes 212Purchasing and Receiving Products 214Purchasing Food and Beverage Products 214Receiving Products 218Managing Inventory and Production 223Placing Products in Storage 223Maintaining Product Security 225Managing Production 226Controlling the Cost of Sales Percentage 228Controlling Food Costs 228Controlling Beverage Costs 229Optimizing Cost of Sales 2319 Labor Cost Control 238The Importance of Labor Cost Controls 239Total Labor Costs 239Factors Affecting Total Labor Costs 241Accounting for Total Labor Costs 246Types of Labor Costs 247Accounting for Labor Costs 247Assessment of Total Labor Costs 251Sales per Labor Hour 252Labor Dollars per Guest Served 25310 Operating Budgets 263The Importance of Operating Budgets 264Types of Operating Budgets 264Advantages of Operating Budgets 265Creating an Operating Budget 266Revenue Forecasts 268Expense Forecasts 270Monitoring the Operating Budget 276Comparing Planned Results to Actual Results 277Modifying the Operating Budget 28311 Cash and Revenue Control 288The Importance of Revenue Control 289External Threats to Revenue Security 290Internal Threats to Revenue Security 291Developing a Revenue Security Program 296Objectives of Internal Revenue Control 296Elements of Internal Revenue Control Systems 297Implementing and Monitoring a Revenue Security Program 299Verification of Product Issues 300Verification of Guest Charges 302Verification of Sales Receipts 303Verification of Sales Deposits 303Verification of Accounts Payable (AP) 30512 Accounting for Fixed and Other Assets 310Accounting for Fixed Assets 311Recording Fixed Asset Purchases 312Depreciating Fixed Assets 314Straight-Line Depreciation 314Double Declining Balance Depreciation 315Other Issues Related to Fixed Assets 317Uniforms, Linens, China, Glass, Silver, and Utensils 317Disposal of Fixed Assets 318Exchange of Fixed Assets 319Accounting for Other Assets 321Choosing Professional Accounting Assistance 322Monitoring Evolving Accounting Issues 327Glossary G-1Index I-1