INTERNAL CONTROL FOR HOSPITALITY OPERATIONS I.. One of the characteristics of hospitality businesses that render them vulnerable to theft is that there are many cash transactions.. An op
Trang 1INTERNAL CONTROL FOR HOSPITALITY OPERATIONS
I Questions
1 Refer to page 116, paragraph 1
2 Refer to page 116, paragraphs 2 and 3
3 Refer to pages 117 to 122
4 One of the characteristics of hospitality businesses that render them vulnerable
to theft is that there are many cash transactions Many hotel and restaurant guests use cash to settle their accounts and to make other purchases during their stays Even though credit cards are increasingly being used, a large number of transactions that involve cash occur each day Many hotels have several profit centers that are open for much of the day (sometimes even 24 hours) These operations need cash banks They also require several cashier shifts rather than the single shift many retail outlets can get by with Cash is the most vulnerable
of all assets It is therefore imperative to have an effective system of internal control over cash
5 An operation’s internal controls may be documented and reviewed by
flowcharting and by using internal control questionnaires A flowchart diagrams
the flow of documents through an organization, indicating the origin, processing, and final deposition of each document In addition, the flowchart shows the segregation of duties Flowcharting is useful because it provides a concise overview of the internal control system It facilitates review of the internal control system, enabling management to identify weaknesses for corrective action
A second device for studying a hospitality operation’s system of internal control
is the internal control questionnaire (ICQ) The ICQ uses a series of
questionnaires about controls in each accounting area to identify weaknesses ICQs generally provide complete coverage for each accounting area However, they do not reveal document flows as do flowcharts From a practical viewpoint, both flowcharts and ICQs should be used in documenting and reviewing an operation’s system of internal control
Trang 26 To handle minor disbursements requiring cash, a petty cash fund should be established Initially, the fund should be established with sufficient cash to handle approximately one month’s transactions The responsibility of accountability and administration of the fund should be under the control of one person
7 The essence of the bank statement reconciliation is to bring the reported bank statement balance into equality with the check register balance Adjustments are made to the reported bank balance by adding or deducting information shown in the check register but not yet handled by the bank Typically, bank omissions will be deposits made but not shown and checks issued but not cashed by the bank The bank statement will inform the business of additions and deductions made from the business checking account that are not known until shown on the bank statement
8 The purpose of a standard cost control is to indicate whether or not all aspects of the business are operating properly and according to desired standards
Standards of performance should be established and results evaluated so that management can determine if standards are being met and so that decisions can
be made that will improve standards, increase performance, and ultimately produce higher profits
9 Refer to pages 132 and 133
II Practical Exercises and Problems
A EXERCISES
EXERCISE 1
1 Effectiveness and efficiency of operations
2 Effectiveness and efficiency of operations; Reliability of financial reporting
3 Effectiveness and efficiency of operations
4 Effectiveness and efficiency of operations
5 Effectiveness and efficiency of operations
6 Effectiveness and efficiency of operations; Reliability of financial reporting
EXERCISE 2
1 Preventive Control
2 Preventive Control
3 Detective Control
4 Preventive Control
5 Detective Control
Trang 3EXERCISE 3
2 Preventive (P) / Detective (D) Administrative (AD)
EXERCISE 4
1 Preventive (P) Accounting (AC) / Administrative (AD)
6 Preventive (P) Accounting (AC) / Administrative (AD)
8 Preventive (P) Accounting (AC) / Administrative (AD)
B PROBLEMS
PROBLEM 1
Requirement (1)
Total disbursements from the fund P809.60
Requirement (2)
Less: Disbursements in October 809.60
Add: Reimbursement, October 31 809.60
Balance of Petty Cash Fund, November 1 P1,000.00
Accounting, November 30
Trang 4The total amount due from the clerk is P200 represented by the P100 shortage during the cash count and P100 advance he/she took from the fund
PROBLEM 2
Bank Statement Reconciliation
Bank Statement Balance P35,060 Check Register Balance P47,400 Add: Deposits in transit 22,660
Erroneous debit 200
Deduct: Outstanding checks Deduct: Service charge (40
Erroneous credit (3,560
PROBLEM 3
The responsibilities which the owner should take over are:
1 Approving invoices for payment
2 Signing checks
3 Collecting cash from office & restaurant & verifying cash against the tapes
4 Depositing the cash in the bank (This may be delegated.)
PROBLEM 4
The present system of selling tickets is much more effective in controlling the revenues from the bar than allowing the bartender to accept the payment from the customers Accounting for the revenues will be more cumbersome and fraudulent acts of the bartender will be more difficult to detect In any case, cash receipts should be centralized or delegated to someone other than the bartender
PROBLEM 5
Requirement (a)
Item Cost
Selling Price
Quantity Sold
Total Standard Cost
Total Standard Revenue
Cost Percentag e
Trang 5TOTAL P9,137.00 P30,060.00
Standard cost percentage
Actual cost percentage
Requirement (b)
If I were the dining room manager, I would be satisfied with the results because the variance of 0.21% is very insignificant It should be remembered that standard cost and revenues are estimated figures and the fact that the actual figures almost equaled these standards yield very good outcome
= Total Standard Revenue =Total Standard Cost P30,060.00P9,137.00 x 100 = 30.40%
= Total Actual Revenue Total Actual Cost = P30,060.05P9,201 x 100 = 30.61%