Keywords for Restaurant Accounting

 Keywords for Restaurant Accounting

Delving into restaurant accounting with limited knowledge can become overwhelming. By learning a few key concepts and terms, restaurants can better understand the accounting process-

  • Cost of Goods Sold (COGS)

COGS is the cost of the entire restaurant inventory, such as the ingredients needed to fulfill the menu. The COGS can be calculated per menu item to find how much every dish is worth, determining the restaurant's profitability. The COGS formula is-

Beginning Inventory + Purchases Inventory Ending Inventory


  • Restaurant Labor Cost

This is the cost of labor required to run the restaurant on an average workday. This expense is typically one of the highest restaurant costs, alongside food. Labor costs include wages for servers, hosts, bussers, cooking staff, and others on the payroll. Accountants must also include payroll taxes, employee benefits, and any overtime.


  • Direct Labor

Direct labor refers to the cost to maintain a restaurant, including labor and resources.


  • Prime Cost

Prime cost is the total of COGS and labor costs, including all expenses incurred on supplies, employees, and taxes. Restaurants need to have an accurate measure of prime cost, as it consists of the majority of cash flow.

 



 

 

  • Chart of Accounts

Chart of accounts is a list that determines what areas handle cash flow in and out of a restaurant. This typically includes assets, liabilities, revenue, expenditures, and equity.

These groups are organized with balance sheets and income statement accounts. However, many businesses use subcategories to further break it down, including marketing budget, COGS, total sales, and inventory costs.


  • Fixed vs. Variable Expenses

Fixed expenses do not fluctuate depending on sales or usage. Common fixed costs include rent, labor wages, and operating expenses. Variable costs, on the other hand, change based on sales, labor, and other elements. This could include direct labor, taxes, and commissions.


  • Cost-to-Sales Ratio

This metric divides food cost by food sales to determine how much profit is made from each menu item. Restaurants should aim between 28% and 35%, as it shows good financial health.


(Food Cost / Food Sales) x 100

 


Image from pixabay.com

  • Food Cost Percentage

This metric divides the COGS by total sales from a specific timeframe to determine food costs from the remaining inventory.

(COGS / Total Sales) x 100


  • Restaurant Accounting Cycle


This is the process restaurants use to prepare financial documents during an accounting cycle. The process is initiated when a customer places their order. The transaction is then recorded in the point-of-sale (POS) system and transferred to the ledger.


  • Cashier's Summary

The cashier's summary lists the starting cash and all transactions throughout the day. Deposits should be categorized by credit card companies, cash, sales tax, tips, and amount.


  • Reconciling the Balance Sheet

While the balance sheet defines assets and liabilities, many accountants tend to only pay attention to the profit and loss statement. However, the balance sheet must first be double-checked to ensure the values are accurate.


Restaurant accounting is a tedious process that requires attention to every financial aspect of a business. When done correctly, establishments can gain an accurate view of their overall performance and profitability.

Comments

Post a Comment

Popular posts from this blog

Classification of Sauces or Types of Sauces

  Classification of Sauces or Types of Sauces Béchamel Sauce or White Sauce: Béchamel   sauce , or white sauce, was a sauce most often served to the rich or to royalty. Made out of a  roux  of flour,  boiled  milk and butter, the creamy-white sauce added a smooth touch to white meats such as chicken, vegetables and eggs. In the years before refrigeration, milk products were rarely used in the  recipes  of the average French housewife. Espagnole Sauce or Brown Sauce: This sauce starts with a dark brown roux, veal stock, beef, bones, vegetables and  seasonings . It is heated, skimmed and reduced. After the initial reduction, tomato sauce is added, and the sauce is further reduced. The entire process is time-consuming, taking hours (if not days) until the sauce is ready. The flavour of Espagnole sauce is concentrated and intense, so it is rarely served directly on food. Veloute Sauce or Blond Sauce: Thickening a white stock with an a...
Read more

The importance of profit and loss statements for independent hotels

Image
  The importance of profit and loss statements for independent hotels 1. Highlighting capital flows Periodic P&L reports are essential for the success of your hotel, as they highlight where your profits are coming from and where your expenses are going. For this reason it is a key tool you want to make data-driven decisions on expenses and revenue at an operational level. 2. Understanding precisely how each department is performing Your P&L statement provides a close scrutiny of departmental performance across your hotel. It also allows you as the hotel manager to analyse this performance compared with your overall and departmental budgets per week, month, quarter or year. The key benefit is that it provides you with insights to identify financial performance weaknesses and strengths. You can then act accordingly to make improvements, such as through cutting hotel costs, enhancing underperforming areas, or investing in new revenue growth streams. The P&L is of course st...
Read more

18 Types of Service / Classification of F&B Service

  18 Types of Service / Classification of F&B Service   18 Types of Service / Classification of F&B Service Different Types of Food and Beverage Services in Hotels | Restaurants There are many different types of food and beverage service types or procedures, but the major category of the food service is  1)  Plate Service,  2)  Cart Service,  3)  Plater Service,  4)  Buffet Service and  5)  Family style service. Below is the list of different type of food and beverage service followed by hotel, resorts, restaurants, fast food establishments etc. 1. Table Service / What is a Table service? Table service is considered as a border category of service style which consists of English Service, American Service, Pre plated Service Etc. In this type of f&B service, the guest is seated at the table with laid cover and orders from the menu. The guest has to be greeted with an eye c...
Read more