Question

Discuss in detail the Income Statement. What is shown on the Income Statement? Why is the Income Statement important to a hospitality firm?

(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

Answer 1

An income statement is a type of financial statement that shows company’s financial performance for a specific accounting period. It give the overall view of total expenses and total income, it shows the net profit and net loss incurred by a firm for a specific accounting period.

The equation on which the income statement is based is

Revenue- Income = Net Income

The income statement is divided into two parts i.e Operating and Non- Operating

Operating includes all revenue and expenses that are direct relation with the regular business operation such as electricity bill, telephone bills, rent paid, selling expenses, administration expenses etc.

Non- Operating includes all revenue and expenses that are not directly related to a company’s regular operation, such as interest expenses, pre income tax. Unusual expenses etc.

The income statement is important to a hospitality firm, it is used to measure the financial performance of their department and to monitor and improve the daily operation of their department. It is the way to measure the financial performance of the department by comparing the current year performance with the previous year and to the most recent forecast. It is the financial report that involves four step of cycle, first step to provide the product and service to the customer that produce the number of revenue, expenses and profit. The second step that the number that are submitted to accounting are accurate and useful. The third step is to analyse and discuss the number to determine how well the hotel operations are meeting their goals and budget. It includes providing critiques and detail of operation that can assist them and account manager in determining the best or the next course of action to take against the operation. Fourth step involves the ones responsibility for applying the number of operation by implementing changes for improvement and to corrections to solve problem.

All the hospitality firms need to generate revenue to stay in a business. The firm uses the revenue to pay its expenses, interest payments of Debt and taxes owed to the government. After these costs of doing business is paid , the amount left over is called as net income .The Income which is available to shareholders, though instead of paying dividends, the firm’s management often choose to retain earning for future investment in the business.