CHI Financial Accounting in Hospitality 2 — Questions and Answers
Question 1: In hospitality accounting, which method records revenue when a guest checks out rather than when payment is received?
- Cash basis accounting
- Accrual basis accounting (Correct answer)
- Modified cash basis accounting
- Installment method accounting
Correct answer: Accrual basis accounting
Accrual basis accounting records revenue when it is earned (at checkout) rather than when cash is received.
Question 2: A hotel's RevPAR is $85 and its occupancy rate is 68%. What is the Average Daily Rate (ADR)?
- $57.80
- $125.00 (Correct answer)
- $153.00
- $115.47
Correct answer: $125.00
ADR = RevPAR ÷ Occupancy Rate = $85 ÷ 0.68 = $125.00.
Question 3: Which document summarizes a hotel's assets, liabilities, and owner's equity at a specific point in time?
- Income statement
- Statement of cash flows
- Balance sheet (Correct answer)
- Trial balance
Correct answer: Balance sheet
The balance sheet (statement of financial position) shows assets, liabilities, and equity at a single date.
Question 4: A restaurant's cost of goods sold is $42,000 and food sales total $120,000. What is the food cost percentage?
- 28.6%
- 35.0% (Correct answer)
- 42.0%
- 22.5%
Correct answer: 35.0%
Food cost percentage = COGS ÷ Sales × 100 = $42,000 ÷ $120,000 × 100 = 35%.
Question 5: In the Uniform System of Accounts for the Lodging Industry (USALI), which department is classified as an undistributed operating expense?
- Rooms department
- Food & Beverage department
- Administrative & General (Correct answer)
- Minor operated departments
Correct answer: Administrative & General
Under USALI, Administrative & General is an undistributed operating expense that benefits the entire property.
Question 6: Which type of budget compares actual results against projections and highlights variances?
- Static budget
- Rolling budget
- Flexible budget (Correct answer)
- Operating budget
Correct answer: Flexible budget
A flexible budget adjusts for actual activity levels, making variance analysis more meaningful.
Question 7: When a hotel records a security deposit paid by a guest as a liability, this illustrates which accounting principle?
- Revenue recognition principle (Correct answer)
- Matching principle
- Conservatism principle
- Going concern principle
Correct answer: Revenue recognition principle
The revenue recognition principle dictates that the deposit is a liability until earned (room is occupied), not yet recognized as revenue.
CHI Financial Accounting in Hospitality 2
In hospitality accounting, which method records revenue when a guest checks out rather than when payment is received?