Independent feeding house owners often do their own bookkeeping. Even if they hire a professional controller at year's end, they may save sizeable money by handling the weekly tasks themselves.
Setting up a chart of accounts to fit the feeding house necessarily generally requires customizing the default choices of any accounting program. The selection of gross revenue and cost of goods accounts on most systems does not provide for the separation of food and potable categories that are required.
Even the leading bookkeeping program for small business, spell it has a default selection for feeding houses, fails to provide all of the accounts that most feeding house owners require. In addition, many of the expense accounts that are added are rarely used, leading to confusion during data entry, and don't help with the overview of the business finances.
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The National Restaurant Association publishes a book titled Uniform System of Accounts for Restaurants. The book provides elaborate descriptions of the application of generally accepted accounting principles to the feeding house industry.
That book admits a sample chart of accounts, but notes that "the codes used here are not the only method for classifying the accounts". It points out that most feeding houses will not use all of the categories listed, and it also notably lacks breakdown of inventory and cost categories beyond "food" and "potable". Many feeding house owners want further separation of those categories to admit sub-categories such as "meat", "seafood", and "produce", and possibly "beer" and "wine" for potable categories.
While many programs do not require the use of account numbers, the NRA book states that some type of account enumeration system must be used. If your program is not showing account numbers, it should have an option on a set up screen to activate that feature.
Any account enumeration system is generally sorted so that accounts of a particular type fall inside a specific range of numbers. For example, pluss may be in the 1000 range, and income accounts in the 4000 range. On systems with many detail accounts, 5 digit numbers may be accustomed allow more sub-categories, but that is rarely required for a small feeding house.
Typical number ranges that are used by many accounting systems are as follows:
Asset accounts: 1000-1999
Liability accounts: 2000-2999
Equity accounts: 3000-3999
Revenue accounts: 4000-4999
Cost of goods: 5000-5999
Expenses: 6000-8000
"Other" accounts: 8000-9999
Asset Accounts
Asset accounts admit cash, bank accounts, inventory, and everything else that is owned.
It is common to assign the first account number, 1000, to Cash, since they are commonly ordered, inside each group, by liquidity (ease of converting to cash).
A separate account should be used in the chart of accounts for each bank account maintained for the business. If merchandiser deposits take a couple of days to reach the bank, a merchandiser account can be used. Also, if checks are accepted and not processed electronically, an account should be created for checks to be deposited.
New accounts are commonly numbered 10 digits apart, so your first two bank accounts may use 1010 and 1020 as account numbers in the chart of accounts. Leaving gaps between the numbers makes it easy to add other account later and squeeze it in to the sort order in any position.
The plus accounts can be numbered as such:
- 1000 Cash
- 1010 Primary Bank Account
- 1020 Bank Account #2
- 1060 Merchant Deposit Account
- 1080 Checks Received
- 1100 Accounts Receivable
- 1200 Food Inventory
- 1210 Meat Inventory
- 1220 Poultry Inventory
- 1230 Seafood Inventory
- 1240 Dairy Inventory
- 1250 Produce Inventory
- 1260 Bakery Inventory
- 1270 Frozen Inventory
- 1280 Grocery Dry & Canned Inventory
- 1320 Beverage Inventory
- 1330 Liquor Inventory
- 1340 Beer Inventory
- 1350 Wine Inventory
- 1360 Merchandise Inventory
- 1380 Bar & Consumable Inventory
- 1400 Prepaid Expenses & Advances
- 1450 Recycle return value
Assets that have a life of several years or more are referred to as Long Term Assets. This also admits any real estate.
- 1500 Fixed pluss
- 1510 Land & Building
- 1520 Automobile
- 1530 Furniture Fixtures & Equipment
- 1540 Leasehold Improvements
- 1600 Accumulated Depreciation
- 1700 Capitalized Start Up Expenses
- 1800 Security Deposits
Liability Accounts
Liability accounts admits things like charge card game and payables to vendors. It also admits money that has been received for things like tax that is imputable the state, tips imputable the employees, and gift card game sold but not yet redeemed. Real estate loans and other major funding is sub-categorized as long-term liabilities.
Liability accounts can be numbered as:
- 2000 Accounts Payable
- 2110 Credit Card
- 2120 Credit Card #2
- 2130 Credit Card #3
- 2140 Credit Card #4
- 2210 Sales Tax Payable
- 2220 Second Tax Payable
- 2250 Payroll Liabilities
- 2260 Second Payroll Liability
- 2280 Tips held
- 2300 Gift card game & certificates
- 2350 Customer Credits
- 2400 Notes Payable
- 2500 Other debt
Equity Accounts
The owners' investment in the company is pictured in the equity accounts. For a corporation, this admits the shareholders equity. It is effectively the money that the business owes back to the owners. When an accounting period is closed, the balance of the income and expense categories is transferred to Retained Earnings, which is also an equity account.
The most basic equity accounts could be numbered:
- 3000 Owner Capital
- 3100 Common Stock
- 3300 Retained Earnings
Income Accounts
Sales fall into the general category of income accounts. A feeding house will plainly want separate categories for food and potable gross revenue, and may want further separation of beer, wine, and liquor gross revenue.
Typical income accounts are:
- 4000 Sales Revenue
- 4200 Food Sales
- 4320 Beverage Sales
- 4330 Liquor Sales
- 4340 Beer Sales
- 4350 Wine Sales
- 4360 Merchandise Sales
- 4500 Catering & contracts
- 4700 Other Operating Income
- 4900 Discounts
One difference between the NRA recommendations and many other lists involves the placement of the "other income" accounts. This can admit income from sources such as cover charges, games or hawking machines, and banquet room rental. Most lists place these accounts in the 8000 range, above expenses, but the NRA list places them in the 6000 range.
Most small locations will only need a single category for other income. Since "cost of goods" is a general sub-category of expenses, it makes sense to avoid placing an income category midmost of the range from COGS through expenses. A single account has been placed in that list inside the 4000 range.
Putting the discounts into the revenue category implies that this will be a "contra" account. Where most of the gross revenue categories will have a credit balance, discounts will commonly have a debit balance.
Cost of Goods Accounts
The Cost of Goods accounts, also called Cost of Sales or Cost of Goods Sold, represent the food and potable purchases to provide the meals. Other expenses directly corresponding gross revenue may be admitd, such as merchandiser fees or expendable cups and napkins.
The numbers used here also provide consistency crosswise all accounts, as the last 3 digits of each COGS category is the same as the last 3 digits on the associated inventory account.
A cost of goods list could admit:
- 5000 Cost of Sales
- 5200 Food Cost
- 5210 Meat Cost
- 5220 Poultry Cost
- 5230 Seafood Cost
- 5240 Dairy Cost
- 5250 Produce Cost
- 5260 Bakery Cost
- 5270 Frozen Cost
- 5280 Grocery Dry & Canned Cost
- 5320 Beverage Cost
- 5330 Liquor Cost
- 5340 Beer Cost
- 5350 Wine Cost
- 5360 Merchandise Cost
- 5380 Bar & Consumable Cost
- 5600 Delivery & direct labor Cost
- 5700 Merchant Fees
Expense Accounts
This example separates the expense accounts into three primary categories: payroll expenses and other expenses. The payroll expenses are sorted in the 6000 range, with the other operational expenses in the 7000 range. Overhead like rent, taxes, and amortization are bumped into the 8000 range.
While accounts must be broken down at to the last-place degree far enough to separate tax lines, combining rarely used accounts will make the overview much easier to understand. The following list combines several categories that are often separated on other charts.
You should check with your controller or tax preparer to ensure that anything you combine does, in fact, share the same tax line.
The Inventory Loss/Waste account has been slid in under the 6000 marker, as some may consider it to belong with the Cost of Goods categories.
- 5800 Inventory Loss/Waste
- 6000 Labor related expenses
- 6100 Management Wages
- 6200 Staff Wages
- 6300 Contract Labor
- 6400 Commissions paid
- 6500 Employee Benefits
- 6600 Workers Comp Insurance
- 6700 Employers Payroll Taxes
- 6800 Payroll processing expense
- 7100 Direct Operating Expenses
- 7110 China - Glassware - Flatware
- 7120 Restaurant & Kitchen Supply
- 7130 Cleaning Supply & Expense
- 7140 Decorations & Guest Supply
- 7150 Laundry - Linen - Uniforms
- 7160 Fees - Permits - Licenses
- 7200 Pest - Security - other contract
- 7250 POS - Tech support - Online serv
- 7300 Marketing
- 7310 Media & Print advertising
- 7320 Promotional events
- 7400 Automobile & travel
- 7500 Music and Entertainment
- 7600 Repairs and Maintenance
- 7700 Utilities
- 7750 Telephone & net connection
- 7800 General and Administrative
- 7810 Bad Debts - Over/short
- 7820 Bank fees
- 7830 Insurance
- 7840 Interest
- 7850 Professional fees
- 7890 Misc. Office expense
- 8100 Rent and Occupancy costs
- 8200 Equipment Rental
- 8600 Sales tax paid on purchases
- 8700 Amortization
- 8900 Other expense
- 9000 Income Tax
Other Accounts
The only left items to account for are the sale of major pluss, other income from sources besides feeding house operations (such as investments or sub-letting space), and a placeholder account for minutes where the business owner necessarily their controller's assistance.
- 9500 Gain/Loss on sale of pluss
- 9900 Other Income (not from operation
- 9999 Ask My Accountant
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