pa 11 Fi nanci aI Analysis
Financial Statement Formats
The formats of the Summary Statement of Income and departmental statements can of coursebe designed to provide only ODeamount column to record figures für the time period covered by the statement. While the primary purpose of any of these statements is to present the revenue and expenses für the most recent accounting period, the true significance of such amounts can only be fully understood when compared with budgets and/or the corresponding amounts für preceding periods. Accordingly, individual properties should modify the format of these statements to meet their needs ~nd requirements. For example, properties may find it useful to expand this ~asic format by adding columns to provide: . . A comparative analysis of the current period results with the amounts budgeted for the period A comparative analysis of the current period results with those of the same period fot the preceding year Cumulative year-to-date information Percentage relationships between revenue and expenses
Comparisons can be made by either horizontal or vertical analyses. Horizontal analysisindicates the absolute (dollar) and relative (percentage) differences betweeDthe two amounts of the same Iine items. The absolute differences Me simply the dollar differences between the figures (tbis year and last year or actual and budget). The relative differenceSare percentage differences, and are calculated by dividing the absolute differentes by the prior year or budget amounts. Vertical analysis uses flet revenue as a common denominator and reduces the amount of each line on the respective income statements to a percentage. This analysis producescommon-size statementsthai permit reasonable comparisons of two or more periods with different levels of activity. The introduction of the microcomputer and the development of spreadsheet pro grams have greatly facilitated the generation of more complex interne statement formats. The user need only enter current and prior period or budget information, and the computer can perform the necessarycomputations and format the statements. Alternative IncomeStatement FormatA presents a format that inc1udescolumns für both current period and year-to-date information and comparative figures. The comparative figures may be budg~t numbers or the results of the same period für the preceding year. A comparison to budget or forecast is preferred since this enablesmanagementto concentrateon the underlying business reasonsthai actual results exceededor fell short of planned results. Comparisons with previous periods,
158 Uniform System01AccountsfoT the Lodging Industry
although not asmeaningful ascomparisonswith budgets,areuseful für indicating
the relativeperformance currentoperations. of
For thosepropertiesdesiring a more campierepresentation, AlternativeIncome Statement FormatB includes a provision für both rurrent period and year-to-date information asweIl as für comparisonwith both the budget and a prior period. In addition, a column haBbeenprovided to show the year-to-date dollar variance betweeDactual resultsand the budget. In this instance, explanatoryanalysis of the an variance should accompanythe financial statements. When calculating the percentagecolumns of thesealternative income statements, flet revenueis normally used as the baseand expenses expressedas a are percentageof net revenue.Propertiesmay chooseto show the percentagesfor all line Herosor only thosefür the more important items.In addition to reporting the percentagerelationship between revenue and-expenses, departmental schedules may alsopresentstatisticalinformation regardingthe efficiencyof operations.Typical statistics associated with each of the departmentalschedules discussedin is Section11.
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