HOTEL EXPENSE ACCOUNTING

In the accounting terminology, expense is an income statement account representing the cost of items consumed in the process of generating revenue (ex. Cost of Goods Sold) or that expires due to the passage of time (ex. Depreciation Expense). Expense cannot be mixed with expenditure. For, Expenditure represents the purchase amount (whether paid in cash or credited with the Accounts Payable) of a certain asset. To illustrate, suppose, on January 1st, 2001, XYZ Company paid $ 10,000 cash in order to purchase some equipment this is called expenditure and is journalized as follows:

Cash $ 10,000 Equipment $ 10,000

However, on December 31st, 2001, XYZ shall allocate a certain value of the initial investment of equipment to be placed as an expense to show that a certain portion of the equipment has been already used to contribute to Company's revenue. Suppose that this amount was determined to be $ 650. This very amount is called an expense and is journalized as follows:

Depreciation Expense-Equipment $ 650 Accumulated Depreciation-Equipment $ 650

According to the matching principle, all expenses must be recorded in the same accounting period as the revenue that they helped to generate.
In the hotel industry, expenses are divided into two main categories: • Direct Expenses: These are the expenses that vary with the level of production. For example, in the Food and Beverage department, the Cost of Food Sales is a direct expense. For, the more dishes we serve, the more cost of Food Sales the Hotel incurs. Moreover, in the Telephone Department, the Cost of Calls is a direct expense. For, the more we connect guests to whatever destination wanted, the more cost of calls the hotel incurs.

At this very stage a bracket would be opened to explain that there is a primordial difference between revenue generator