Professional Documents
Culture Documents
Spring 2015
Financial Management Assignment
purposes just like the business property. A third important liability is the amount we owe to our food distributors
and providers. We order food weekly or whenever is needed. Therefore, considering food costs is another
liability because we want to be on top of our balances and bills; making sure we are on time with our payments.
4. What 5 GAAP principles do you see as very important to follow? (Provide brief description and why. (10)
The Generating Accepted Accounting Principles are accounting rules used to prepare and standardize the
reporting of financial statements, such as balance sheets, income statements and cash flow statements, for
publicly trade companies and many private companies in the U.S, issued by the Financial Accounting Standard
Board.
Five important principles of GAAP includes:
1) Economic Entity Assumption: The accountant keeps all the business transactions separate from the business
owners personal transactions. Both proprietorship and its owner and considered to be on entity; in legal
purposes, but separate for accounting purposes.
2) Monetary Unit Assumption: Economic activity is measured and recorded in the U.S dollars, considering
that the dollar purchasing power has not changed over time.
3) Time Period Assumption: This principle assumes that it is possible to report ongoing activities of a business
in a short period of time or time intervals.
4) Cost Principle: This principle refers to the amount spent when an item was purchased. These amounts are
shown in the financial statements for evidence, historical purposes, and backup transactions.
5) Full Disclosure Principle: Certain information is important to investors or lenders when using financial
statements. Therefore, all information should be disclosed within the statement or in the notes to the statement;
usually displayed in the footnotes.
GAAP makes a companys financials comparable and understandable so that investors, creditors and others can
make rational investment, credit, and other financial decisions. The information provided must be relevant,
reliable, comparable, and consistent. Therefore, it is important to know GAAP in order to report finances of a
company or government entity. Without it, companies would be free to decide for themselves what financial
information to report and how to report it.
6. Identify 3 specific financial records that are important in Purchasing, Stores, and Food Production and
provide a brief description of each. (12)
Purchasing:
1) Purchase orders- Written requests to a vendor indicating types, quantities and agreed prices for products
or services.
2) Invoices- A list of goods shipped or delivered. Includes prices and service charges.
3) Requisitions- Form used to request desired products including food and supplies. Generally this form is
made by an individual department and is then submitted to the purchasing department.
Stores:
1) Requisition or storeroom issue records- Document generated by storeroom personnel to notify the
purchasing department of items needed to be ordered, the quantity and the timeframe.
2) Perpetual inventory- A running record of the balance on hand for each item of goods in a storeroom.
3) Physical inventory- an actual account of items in all storage areas.
Food Production:
1) Standardize recipes- A recipe that has been tested and adapted for use by a given food service operation
and was found to produce good results when followed exactly as instructed.
2) Production schedule- The timetable for the use of resources and processes required by a business to
produce goods or provide services. Used to communicate production demand and expectations to the
production staff.
3) Forecasts and tallies- The basis for estimating in advance the quantities of menu items to be prepared
and foods to be purchased from the storerooms.
7. Briefly discuss 2 ratios that are used in foodservice. One ratio should indicated productivity and another
profitability. Provide an example of each (in numbers). (10)
Profitability Ratio:
Food cost per patient = food cost/ number of patients
Productivity Ratio:
Meals per labor hour= number meals served/ number labor hours
8. . Problems (9)
Food cost: $5722. Sales 18,900. What is the food cost percentage?
Food cost percentage = food cost/ sales price x 100
Fcp= $5722/$18900 x 100
Fcp= 30%
Menu item cost: $1.35. Selling price of an item: $4.00. What is the food cost percentage for the menu
item?
Fcp= $1.35/$4.00 x 100
Fcp= 34%
If a restaurant hopes to have a food cost percentage of 35%, what would the menu price be if the food
cost is 5.25? (Be certain to include unproductive costs and make sure your answer is rounded up to the
nearest reasonable amount.)
$5.25 x 1.1 (to account for unproductive costs) = $5.78
35%= 5.78/menu cost x 100
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