2. Hospitality Accounting Cycle, Standards and USALIIntroduction and ContextFinancial management in hospitality begins with reliable accounting information. A hotel may sell rooms, meals, beverages, conference facilities, spa treatments, parking, and other services through several departments, channels, and payment arrangements. Each transaction must be identified, measured, recorded, classified, summarised, reviewed, and reported. This sequence is known as the accounting cycle. The accounting cycle is more than a bookkeeping routine. It converts operational activity—occupied rooms, restaurant covers, banquets, payroll hours, purchases, commissions, and cash collections—into information for managerial decisions. The general manager uses it to evaluate performance, the revenue manager uses it to assess sales and distribution costs, department heads use it to control resources, and owners and lenders use it to evaluate financial sustainability. Hospitality accounting is complicated by high transaction volumes, multiple revenue streams, significant cash handling, perishable inventories, advance deposits, cancellations, loyalty programmes, seasonal demand, and the need to distinguish departmental performance from undistributed operating costs. The Uniform System of Accounts for the Lodging Industry (USALI) provides a common reporting language for lodging enterprises. It supports comparability while allowing management to adapt reports to local law, ownership structure, brand requirements, and operating strategy. This chapter explains the accounting cycle, accrual accounting, adjusting and closing entries, revenue recognition, depreciation, inventory valuation, relevant reporting standards, and the departmental logic of USALI. The emphasis is on interpretation: students should be able not only to prepare entries but also to understand what those entries reveal about hotel operations. Learning ObjectivesBy the end of this chapter, the learner should be able to: 1. Explain the purpose and stages of the hospitality accounting cycle. 2. Distinguish cash accounting from accrual accounting and apply the matching and going-concern principles. 3. Record common hotel transactions using double-entry accounting. 4. Prepare and interpret adjusting and closing entries. 5. Explain revenue recognition, depreciation, impairment, and inventory valuation in a hospitality context. 6. Describe the relationship between financial reporting standards, internal policies, and USALI. 7. Classify hotel revenues, departmental expenses, undistributed operating expenses, and non-operating items. 8. Use departmental reports to support cost control and managerial decision-making. 9. Identify control risks, ethical issues, and technology-related challenges in hotel accounting. The Accounting Cycle as an Operating Information SystemThe accounting cycle normally begins when an economic event occurs. A guest checks out, a supplier delivers food, an employee earns wages, or a hotel receives an advance booking deposit. Source documents provide evidence of the event. These may include invoices, purchase orders, receiving reports, point-of-sale records, registration cards, folios, bank statements, payroll records, and electronic payment confirmations. The transaction is then analysed: which accounts are affected, by what amount, and in which accounting period? It is recorded in a journal, posted to the general ledger, and summarised in a trial balance. At the end of the period, adjustments are made for accruals, prepayments, depreciation, inventory consumption, bad debts, and other items. Adjusted balances support the preparation of financial statements and management reports. Temporary revenue and expense accounts are subsequently closed, while permanent accounts remain open for the next period. The cycle can be represented as: Economic event → source document → transaction analysis → journal entry → ledger posting → unadjusted trial balance → adjustments → adjusted trial balance → reports → closing entries → post-closing trial balance. The sequence is systematic, but it is not entirely automatic. Professional judgement is required when determining whether a booking deposit is revenue or a contract liability, whether a repair is an expense or a capital improvement, or whether an inventory loss is normal operational usage or an abnormal variance. Double-entry and the accounting equationDouble-entry accounting records each transaction with equal total debits and credits. The basic equation is: Assets = Liabilities + Equity Assets include cash, receivables, inventories, property, equipment, and right-of-use assets. Liabilities include trade payables, wages payable, taxes payable, borrowings, lease liabilities, and guest deposits. Equity represents owners’ claims after liabilities are deducted from assets. Revenue increases equity, while expenses and distributions reduce it. For example, when a hotel purchases food on credit, inventory increases and trade payables increase: - Debit Food Inventory
- Credit Trade Payables
When the hotel later consumes the food, the inventory asset decreases and food cost increases: - Debit Food Cost
- Credit Food Inventory
This distinction is important. Recording the entire purchase as expense at delivery may overstate the current period’s cost if part of the food remains in storage at period end. Accrual Accounting in HospitalityAccrual accounting recognises the economic effects of transactions when they occur, rather than only when cash is received or paid. Revenue is generally recognised when the hotel satisfies its performance obligation and the amount can be measured reliably, subject to the applicable reporting framework. Expenses are recognised when resources are consumed or obligations are incurred. Cash accounting can give a misleading impression of hotel performance. Suppose a corporate client pays $30,000 in December for a conference to be held in February. Under accrual accounting, the December receipt is normally recorded as a contract liability or advance from customer, not December revenue. Revenue is recognised when the conference services are delivered, according to the terms of the contract. Similarly, if employees work during the last week of June but are paid in July, the June accounts should recognise wages payable and the related expense. Without this adjustment, June profit is overstated and July profit understated. Accrual accounting supports several related principles: - Period allocation: income and costs are assigned to the period in which the underlying activity occurs.
- Matching or association: costs associated with earning revenue are recognised in the same period as that revenue, where appropriate.
- Consistency: accounting methods should be applied consistently unless a justified change improves faithful representation.
- Prudence and neutrality: estimates should not deliberately exaggerate assets or income or understate liabilities and expenses.
- Going concern: financial statements are generally prepared on the assumption that the enterprise will continue operating, unless evidence indicates otherwise.
These principles do not permit management to manipulate results by moving revenue or expenses between periods. Accruals must be supported by evidence and reviewed regularly. Recording Common Hotel TransactionsA hotel’s accounting entries reflect its operating structure. The following examples use simplified amounts. Room sale on credit: A guest’s room charge of $500 is posted to the guest ledger. - Debit Accounts Receivable—Guest or City Ledger $500
- Credit Rooms Revenue $500
If a 10 percent sales tax is collected, the credit is divided between Rooms Revenue ($500) and Tax Payable ($50), while the receivable is $550. Taxes collected for governments are liabilities, not hotel revenue. Cash settlement at checkout: - Debit Cash or Bank $550
- Credit Guest Receivable $550
Restaurant sale paid by card: If food revenue is $800 and beverage revenue is $300, with a card settlement of $1,100: - Debit Card Receivable $1,100
- Credit Food Revenue $800
- Credit Beverage Revenue $300
The card processor’s fee is recorded separately when incurred or settled, according to policy. It should not be hidden by reducing revenue unless the reporting framework and policy require net presentation. Purchase of supplies on credit: - Debit Appropriate Inventory or Operating Supplies $2,000
- Credit Trade Payables $2,000
Payment to supplier: - Debit Trade Payables $2,000
- Credit Bank $2,000
Receipt of a booking deposit: - Debit Bank $1,500
- Credit Contract Liability—Guest Deposit $1,500
When the service is provided, the liability is reduced and revenue recognised, subject to the contract terms. Adjustments and Period-End ClosingThe unadjusted trial balance is not necessarily a measure of profit. Adjusting entries update accounts for events that have accumulated or been consumed but have not yet been recorded correctly. They usually do not involve immediate cash movement. Accrued expenses and accrued revenueAt month end, a hotel estimates $12,000 of unpaid wages earned by employees: - Debit Wages Expense $12,000
- Credit Wages Payable $12,000
If the hotel has earned $4,000 of management fees from a property owner but has not invoiced it: - Debit Accrued Receivable $4,000
- Credit Management Fee Revenue $4,000
Estimates should be reversed or cleared when the actual invoice or payroll record is processed, preventing duplication. Prepayments and deferred revenueInsurance, software subscriptions, and annual licences are often paid in advance. If $24,000 covers twelve months and two months have elapsed, $4,000 is recognised as expense and $20,000 remains a prepaid asset. The adjustment is: - Debit Insurance Expense $4,000
- Credit Prepaid Insurance $4,000
The opposite issue arises when cash is received before service delivery. A deposit remains a liability until the hotel performs its obligation or determines that the amount has become non-refundable under the relevant policy and standard. DepreciationDepreciation allocates the depreciable amount of a tangible asset over its useful life. It is not a valuation mechanism and does not represent a cash payment in the period recorded. Under straight-line depreciation: Annual depreciation = (Cost − Residual value) ÷ Useful life A kitchen asset costing $120,000, with a residual value of $20,000 and a ten-year useful life, produces annual depreciation of $10,000. The entry is: - Debit Depreciation Expense $10,000
- Credit Accumulated Depreciation $10,000
Component accounting may be appropriate when significant parts of a building have different useful lives—for example, lifts, roofing, or major plant. Useful lives and residual values should be reviewed when circumstances change. Impairment testing is separate from ordinary depreciation: an asset may require a write-down if its recoverable amount falls below its carrying amount. Inventory adjustmentA physical count is necessary because perpetual records may not capture spoilage, breakage, theft, complimentary consumption, transfers, or recording errors. If beginning inventory is $30,000, purchases are $90,000, and ending inventory is $25,000, cost of goods consumed is: $30,000 + $90,000 − $25,000 = $95,000. The calculation should be reconciled to point-of-sale data and investigated for unusual variances. In a hotel, inventory includes food, beverages, guest supplies, engineering materials, linen, and other operating items. Classification depends on the reporting purpose and the entity’s policy. Closing entriesAt the end of the reporting period, revenue and expense accounts are transferred to an income summary or directly to retained earnings, depending on the accounting system. Temporary accounts then begin the next period with zero balances. Assets, liabilities, and equity accounts are permanent and are carried forward. Closing entries do not create new economic activity; they organise the ledger for the next period. Revenue Recognition and Hospitality ContractsHotel revenue is not limited to the room rate. A single reservation may include accommodation, breakfast, airport transfer, parking, spa access, loyalty benefits, and cancellation terms. Management must identify the promised goods or services, determine the transaction price, allocate consideration where necessary, and recognise revenue as obligations are satisfied. Room revenue is generally recognised over the guest’s stay because accommodation is provided day by day. A non-refundable advance payment does not automatically become revenue on receipt. No-show and cancellation income requires careful analysis of the contract, enforceability, historical practice, and applicable standard. Amounts collected on behalf of governments, owners, or third parties are generally excluded from revenue when the hotel acts as an agent rather than a principal. Gross versus net presentation is a significant judgement. If a hotel controls a service before transferring it to the guest, it may report gross revenue; if it merely arranges another party’s service, it may report only its commission. Online travel agency commissions are commonly treated as distribution expenses when the hotel is the principal, although precise treatment depends on facts and the applicable framework. Revenue reports should reconcile operational measures such as occupied rooms, average daily rate, covers, average check, banquet events, and spa treatments to accounting revenue. A mismatch may signal posting errors, timing differences, tax misclassification, unauthorised discounts, or fraud. Inventory Valuation and Cost ControlInventory valuation affects both profit and reported assets. Common cost-flow methods include first-in, first-out (FIFO) and weighted average cost. The selected method should be permitted by the applicable standard, consistently applied, and appropriate to the nature of the inventory. In many operating environments, physical rotation follows FIFO even where a system uses weighted average cost for accounting. Inventory should generally be measured at the lower of cost and net realisable value where required by the applicable framework. Damaged, obsolete, expired, or slow-moving items may require a write-down. Hospitality managers should distinguish between accounting valuation and operational control. A correct valuation does not eliminate waste; it merely reports its financial effect. Useful control measures include standard recipes, authorised requisitions, receiving checks, blind counts, locked storage, segregation of duties, spoilage logs, transfer records, and variance analysis. Food cost percentage is informative but must be interpreted alongside menu mix, inflation, portion size, complimentary meals, staff meals, and sales volume. Standards, Policies and Professional JudgementFinancial reporting standards establish principles for recognition, measurement, presentation, and disclosure. International hotels may apply International Financial Reporting Standards (IFRS), while entities in the United States may apply US Generally Accepted Accounting Principles (US GAAP). Local company law, tax legislation, securities requirements, lease rules, employment regulation, and brand or management agreements may also affect reporting. USALI is not a replacement for IFRS or US GAAP. It is an industry-oriented framework for organising hotel operating information and presenting departmental results. A hotel may prepare statutory financial statements under its required accounting standards while using USALI schedules for internal management, owner reporting, benchmarking, and budgeting. Standards and USALI may use different purposes and levels of detail. Statutory statements focus on the financial position, performance, cash flows, and disclosures of the reporting entity. USALI focuses on operational departments and the relationship between revenues, departmental expenses, undistributed operating expenses, fixed charges, and profit measures. Reconciliation between management reports and statutory accounts is therefore essential. Professional judgement is unavoidable, but it must be documented. A sound accounting policy states the treatment, rationale, evidence required, approval authority, and review frequency. Changes should not be made merely to achieve a desired profit figure. USALI and the Departmental View of a HotelUSALI creates a common operating structure. Although editions and local adaptations must be consulted for precise classifications, the broad logic commonly includes the following areas. Operating departments generate revenue and incur expenses directly associated with delivering services. Typical departments include Rooms, Food and Beverage, Other Operated Departments, and sometimes Rentals and Other. Rooms reporting commonly includes transient, group, contract, and other room revenue categories, together with direct rooms expenses such as front office, housekeeping, guest supplies, reservation costs, and related labour. Key measures include occupancy, average daily rate, revenue per available room, labour cost per occupied room, and departmental profit. Food and Beverage is generally divided into food, beverage, and related revenue streams. Expenses include food cost, beverage cost, payroll, operating supplies, and other direct costs. Banquets, restaurants, room service, bars, and catering may require separate internal schedules even when presented within a broader department. Other Operated Departments may include spa, golf, parking, telephone, laundry, recreation, retail, or transportation. Their inclusion depends on the hotel’s activities and the reporting system. Undistributed operating expenses support the whole property rather than one revenue department. Common examples are administrative and general, sales and marketing, information and telecommunications systems, human resources, and property operations and maintenance. These costs are essential to the hotel but are not normally charged entirely to Rooms or Food and Beverage merely because those departments benefit from them. Fixed charges and non-operating items may include property taxes, insurance, rent, certain management fees, depreciation, interest, and income taxes, depending on the reporting structure and the applicable edition or policy. Their treatment must be clearly defined because departmental profit is not the same as earnings before interest, tax, depreciation, and amortisation, nor is it the same as net income. USALI’s value lies in comparability. If two hotels classify payroll, distribution fees, and departmental expenses differently, their ratios may not be meaningfully compared. Managers should therefore ask three questions when interpreting a benchmark: Are the definitions identical? Are the reporting periods comparable? Are differences caused by operating performance or classification policy? Departmental Reporting and Managerial InterpretationA departmental income statement often follows this logic: Departmental revenue − departmental expenses = departmental profit. The property then deducts undistributed operating expenses and other charges to reach progressively lower profit measures. This structure helps managers locate responsibility. A decline in Rooms profit may result from lower occupancy, discounting, excessive labour hours, commission growth, or housekeeping inefficiency. A decline in Food and Beverage profit may arise from menu pricing, purchasing variance, wastage, labour scheduling, or weak banquet utilisation. Managers should avoid judging departments only by revenue. A high-revenue restaurant may destroy value if its food cost, labour cost, and delivery commissions are excessive. Conversely, a small spa may provide strong contribution if fixed resources are already available. Departmental reports should be read with operational statistics and service-quality indicators. Variance analysis compares actual results with budget, forecast, prior period, or benchmark. A useful analysis separates price, volume, mix, efficiency, and timing effects. For example, an unfavourable food-cost percentage may reflect higher supplier prices, but it may also reflect a greater proportion of low-margin banquet sales or unrecorded staff meals. The purpose of analysis is not to assign blame but to identify controllable causes and appropriate action. An Illustrative Case: The Misleading December ProfitBackgroundThe fictional Harbour View Hotel operates 180 rooms, two restaurants, a conference centre, and a spa. Its finance department closes accounts monthly and prepares a USALI-style departmental report for management. SituationDecember reported profit was 18 percent above budget. The general manager initially attributed the result to successful festive events. The financial controller, however, noticed that cash had not increased as expected and that January appeared unusually weak. AnalysisReview identified four issues. First, $60,000 received in December for January conferences had been credited to banquet revenue rather than a contract liability. Second, wages of $22,000 earned in December were not accrued because payroll was processed in January. Third, a food inventory count had not been completed, so the system treated all December purchases as consumed. Finally, online travel agency commissions were netted against room revenue, making both revenue and distribution expense appear lower than policy required. The corrected entries deferred the conference revenue, accrued wages, recorded ending inventory, and presented commissions consistently. December profit fell substantially, but the revised result was a more faithful representation of performance. January improved because the conference revenue was recognised when services were delivered, and the January wage expense no longer included the prior month’s unrecorded liability. Approach and outcomeThe hotel introduced a closing checklist, mandatory event cut-off review, physical inventory count, payroll accrual template, and monthly reconciliation between the property-management system, point-of-sale system, payment gateway, and general ledger. The controller also documented the policy for gross and net presentation of distribution costs and trained department heads to submit complete supporting schedules. Learning pointsThe case demonstrates that strong cash receipts do not necessarily indicate current-period revenue, that an unadjusted trial balance can produce misleading profit, and that classification choices affect managerial ratios. It also shows why USALI-style reports must be supported by disciplined accrual accounting and reconciled to the underlying standards and policies. Controls, Ethics and Common Failure PointsHospitality accounting is exposed to skimming, fictitious refunds, unauthorised discounts, duplicate supplier invoices, inventory theft, payroll manipulation, and premature revenue recognition. Effective internal control does not eliminate risk, but it reduces opportunity and improves detection. Important controls include segregation of cash custody from recording, independent bank reconciliation, sequentially numbered documents, approval limits, daily revenue audits, exception reports, surprise cash counts, restricted system access, supplier-master controls, purchase-order matching, inventory counts, and review of unusual voids and discounts. Small hotels may not have sufficient staff for complete segregation; compensating controls such as owner review and independent reconciliations are then especially important. Ethical reporting requires honesty, objectivity, confidentiality, professional competence, and willingness to challenge unsupported entries. Managers should not pressure accountants to defer expenses, accelerate revenue, conceal waste, or alter departmental classifications to obtain bonuses or satisfy lenders. Estimates should be explainable, material errors corrected, and disagreements escalated through established governance channels. Digital Accounting and Emerging PracticeModern hotels integrate property-management systems, point-of-sale platforms, central reservation systems, payment gateways, procurement software, payroll systems, inventory applications, and enterprise resource planning platforms. Integration reduces manual entry but creates new risks: interface failure, duplicate postings, inaccurate mapping, cyberattacks, weak user permissions, and overreliance on automated reports. Robotic process automation can assist with invoice matching, bank reconciliation, exception reporting, and recurring accruals. Predictive analytics can identify unusual discounts, improbable refunds, purchasing anomalies, and occupancy-to-revenue inconsistencies. Artificial intelligence may support forecasting and anomaly detection, but it does not replace accounting judgement, source-document verification, or management accountability. Data governance should address access, retention, privacy, audit trails, and model reliability. A well-designed digital close process includes automated feeds, documented account mappings, reconciliation dashboards, electronic approvals, audit logs, and a clear owner for every balance-sheet account. Automation should strengthen controls rather than conceal weak processes. Best Practices for a Reliable Hotel CloseA professional monthly close normally includes: - confirming revenue cut-off and reconciling rooms, outlets, banquets, spa, and other systems;
- reconciling bank, card receivables, guest ledgers, city ledgers, deposits, and tax accounts;
- recording payroll, utilities, commissions, rent, interest, and other accruals;
- completing inventory counts and investigating material variances;
- reviewing capital additions, disposals, depreciation, leases, and impairment indicators;
- analysing departmental results against budget and forecast;
- obtaining explanations from responsible managers; and
- retaining evidence, approvals, reconciliations, and version-controlled reports.
The close should be timely but not careless. A fast report with unsupported balances is not a high-quality report. The objective is decision-useful information that is accurate, comparable, understandable, and appropriately cautious. Chapter SummaryThe hospitality accounting cycle transforms operating events into reliable financial and departmental information. It proceeds from source documents and transaction analysis through double-entry recording, ledger posting, trial balance preparation, adjustments, reporting, and closing. Accrual accounting ensures that revenue and expenses are recognised in the periods to which they relate, while adjustments address wages, prepayments, deposits, depreciation, inventory, and other timing issues. Revenue recognition requires attention to the service delivered, contract terms, taxes, deposits, cancellations, and principal-agent relationships. Depreciation allocates asset cost over useful life, while inventory valuation and physical counts support accurate food, beverage, and supply cost reporting. IFRS, US GAAP, local law, and internal policies govern formal reporting; USALI complements these requirements by organising hotel results into operating departments, undistributed expenses, fixed charges, and meaningful performance measures. Effective hotel accounting combines technical accuracy with operational understanding. Controls, reconciliations, ethical judgement, digital integration, and variance analysis allow managers to distinguish genuine performance from timing differences or classification effects. Key TermsAccrual accounting: Accounting that recognises economic events when earned or incurred rather than only when cash moves. Accounting cycle: The recurring process from transaction identification through recording, adjustment, reporting, and closing. Adjusted trial balance: A listing of ledger balances after all required period-end adjustments. Contract liability: An obligation to provide goods or services after receiving consideration from a customer. Departmental profit: Revenue of an operating department less expenses directly assigned to that department. Depreciation: Systematic allocation of an asset’s depreciable amount over its useful life. Double-entry accounting: A system in which every transaction has equal debits and credits. Accrued expense: An expense incurred but not yet paid or recorded in the normal transaction process. Inventory valuation: The process of measuring inventory cost and any required reduction in value. Net realisable value: Estimated selling price less costs necessary to complete and sell an item. Operating department: A hotel department that generates revenue and incurs directly related expenses. Undistributed operating expense: A property-wide operating cost not assigned exclusively to a revenue department. USALI: The Uniform System of Accounts for the Lodging Industry, an industry framework for organising lodging revenues and expenses. Revenue recognition: Determining when and how much revenue should be reported for services provided. Period cut-off: Ensuring transactions are recorded in the correct accounting period. Impairment: A reduction in an asset’s carrying amount when its recoverable value is lower. Variance analysis: Examination of differences between actual, budgeted, forecast, or benchmark results. Permanent account: An asset, liability, or equity account carried forward into subsequent periods. Temporary account: A revenue, expense, or similar account closed at the end of an accounting period. Review QuestionsShort Answer Questions1. What are the principal stages of the hospitality accounting cycle? 2. Why is a guest deposit normally recorded as a liability before the stay occurs? 3. Distinguish an accrued expense from a prepaid expense. 4. State the straight-line depreciation formula. 5. What is the purpose of USALI in hotel reporting? Long Answer Questions1. Explain how accrual accounting improves the measurement of hotel performance, using room revenue, conference deposits, and payroll as examples. 2. Describe the major types of adjusting entries required at a hotel’s month-end close. 3. Explain the relationship between financial reporting standards and USALI. 4. Discuss how departmental reporting helps a general manager control Rooms and Food and Beverage operations. 5. Explain the accounting and control implications of hotel inventory valuation. Analytical / Application Questions1. A hotel receives $40,000 in December for a conference held in February. Analyse the appropriate December and February accounting treatment and explain its effect on reported profit. 2. Rooms revenue is above budget, but Rooms departmental profit is below budget. Identify and analyse at least four possible causes and recommend investigations. 3. A restaurant’s food-cost percentage rises sharply while sales volume remains constant. Develop a diagnostic approach using inventory counts, purchasing records, recipes, transfers, wastage records, and point-of-sale data. 22. Multiple Choice Questions with AnswersQuestion 1A hotel receives an advance payment for a conference that will be held in a future period. What is the most appropriate initial treatment under accrual accounting? A. Recognise the full amount as current-period revenue B. Record the amount as a contract liability C. Record the amount as an operating expense D. Ignore the receipt until the conference is completed Correct Answer: B. Record the amount as a contract liability Question 2Which entry records wages earned by hotel employees but unpaid at month end? A. Debit Wages Payable; Credit Wages Expense B. Debit Cash; Credit Wages Payable C. Debit Wages Expense; Credit Wages Payable D. Debit Prepaid Wages; Credit Cash Correct Answer: C. Debit Wages Expense; Credit Wages Payable Question 3A hotel has beginning food inventory of $30,000, purchases of $90,000, and ending inventory of $25,000. What is food consumed? A. $55,000 B. $85,000 C. $95,000 D. $115,000 Correct Answer: C. $95,000 Question 4Which item is generally classified as an undistributed operating expense in a USALI-style report? A. Food ingredients used by the restaurant B. Guest-room cleaning supplies C. Administrative and general costs D. Beverage cost in the bar Correct Answer: C. Administrative and general costs Question 5What is the primary purpose of depreciation? A. To record the cash paid for an asset each year B. To allocate an asset’s depreciable amount over its useful life C. To increase the market value of hotel property D. To eliminate the need for impairment testing Correct Answer: B. To allocate an asset’s depreciable amount over its useful life Question 6Which statement best describes the relationship between USALI and IFRS or US GAAP? A. USALI replaces all statutory accounting standards B. USALI is a tax code for hotel businesses C. USALI organises lodging operating information while statutory standards govern formal reporting D. USALI applies only to restaurants within hotels Correct Answer: C. USALI organises lodging operating information while statutory standards govern formal reporting Question 7A hotel’s December profit is overstated because January conference receipts were recorded as December banquet revenue. Which accounting concept was violated? A. Period cut-off and revenue recognition B. Physical inventory rotation C. Asset impairment D. Double-entry equality Correct Answer: A. Period cut-off and revenue recognition Question 8Why is a physical inventory count important even when a hotel uses a perpetual inventory system? A. It replaces the general ledger permanently B. It identifies spoilage, theft, breakage, and recording differences C. It guarantees that food costs will fall D. It eliminates the need for purchase approvals Correct Answer: B. It identifies spoilage, theft, breakage, and recording differences Question 9Which control most directly reduces the risk that an employee can steal cash and conceal the theft in the accounting records? A. Allowing one employee to collect, record, and reconcile cash B. Removing all approval limits C. Separating cash custody from recording and reconciliation D. Recording all receipts at month end Correct Answer: C. Separating cash custody from recording and reconciliation Question 10A hotel reports higher room revenue but lower Rooms departmental profit. Which explanation is most consistent with this result? A. Room revenue increased while labour and distribution costs increased even more B. All room-related expenses must have decreased C. The hotel necessarily violated double-entry accounting D. Higher revenue always produces proportionately higher departmental profit Correct Answer: A. Room revenue increased while labour and distribution costs increased even more
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