Question

(400 words required this sucject is hospitality accounting Please write clear your own thought or search the internet. Thank you!)

this is all the requestments

Discuss the 4 methods of depreciation. Which method is best for the hospitality industry?

Answer 1

The Following are menthod of depreciation :

(1) Straight line method - in this method cost of assets minus salvage value after use ful life divided by use ful life years. for example hospitality industru purchased 10 AC at US$ 5000 each and life is five year with no salvage value than per year depreciation is 5000*10/5 i.e 10000 US$ per year of all f AC'S.

(2) Double declining balance :
This method includes an "accelerator," so the asset depreciates more in the beginning of its useful life. This depreciation method is used with cars, for example. You know that a new car depreciates more than an older one.

• Sum of the Years' Digits
  In this method, the number of years in the useful life are summed. For example, if an asset had a useful life of 6 years, the digits would be added: 6+5+4+3+2+1=21. Then annual depreciation would be determined as follows:
  • Year 1 = 6/21 = 28.6% times the cost (or cost less salvage)
  • Year 2 = 5/21 = 23.8%
  • Year 3 = 4/21 = 19%
  • Year 4 = 3/21 = 14.3%
  • Year 5 = 2/21 = 9.5%
  • Year 6 = 1/21 = 4.8%
  • (3) Accelerated Depreciation

  • Favorable tax plans are available to speed up the depreciation process so you can get more tax deductions faster.

    These plans come two forms:

  • A tax deduction, called a Section 179 deduction, for purchase of business vehicles and equipment.
  • Bonus depreciation for purchase of new business vehicles and equipment.

  • Both of these accelerated depreciation features come with limits and qualifications, so check with your tax professional to see if you qualify. You can also read more about accelerated depreciation in general before you proceed.

(4) Written down value method - In this method assets is depreciated @ certain % per year , for ex- Depreciation for first year on 100 @ 30 % is 30 than in next year 30 % on 70 (100-30) i.e 21 and so on.

Hospitality Industry : This industruy mainly covers hotels which provide lodging and boarding facilities for persons .

as far as accounting of hospitality industry is concerned , there is no sale and purchase , in turn it is service industry which provides rooms to persons who stay in hotel , main revenue is from room rent , however food item sale will be like sale and purchase , hence hospitality industry is mixture of service as well as trade.

One have to maintain proper accounts to record all the transactions , for assets purchases , one should capatalize assets and charge depreciation , one have to amortize intangible assets.

Salary and all other expenses like laundry etc have to properly checked and to be recorded in accounts.