HA401 : The Class : Finance : Profit and Loss : P&L Statement

Format and Structure of a P&L Statement

P&L statements have a consistent structure that organizes the financial information into an orderly and useful arrangement. It should be easily read by both CPA’s and financial experts and by operating managers or people interested in the financial performance of a resort or department. We will discuss this format in more detail below.

1. Title — The P&L is for a certain operation for a certain period of time. It should have a title of the resort or department and the month or accounting period (28 days) that it is including financial information on.

2. Horizontal Headings at the Top — The financial information includes both Current Period and Year-to-date information. The current month includes information for one month or accounting period. The year-to-date (YTD) information includes cumulative information. For example the third period would have that period’s financial results and the cumulative three periods financial results in the YTD column. The CM and YTD information is also reported for the Actual results, Budget expectations and Last Year’s actual results. It should look like this:

Current Period/Month				Year to Date
Actual	Budget	Last Year		Actual	Budget	Last Year

3. Vertical Headings Down the Side — This information identifies and describes the different departments that are reporting information. These include Revenue Centers, Profit Centers, Expense Centers and Profit Levels. Revenue departments in Revenue Centers include all operating departments that provide direct products or services to guests and therefore record sales and revenues. These same revenue departments become profit departments as direct operating expenses are deducted from revenues to arrive at department profits. Expense departments do not record sales but have expense operating budgets to control their expenditures. The different profit levels include individual department profit, cumulative or total department profits, house profit and net profit or profit before taxes. An example of a P&L format as explained so far follows:

SEA BREEZE RESORT P&L STATEMENT
3^rd Period 2001

The above section of the P&L records all of the revenues that a resort records during a given accounting time period. This includes the current period and the year-to-date time frames. For each revenue department, the actual results for the current period can be compared to the budget and last years actual. Again, this includes current period comparisons and year-to-date comparisons. Revenue departments that are part of resort operations are highlighted in red. They demonstrate the additional complexity of resort operations and also the wide range of activities that resort guests can choose from.

To recap, the revenue centers or departments record all the resort guests expenditures and report them by operating department. Revenues are in dollars and the percent represents the sales mix percentage, or in other words, the percent of total revenues that are recorded in a specific department. Recording revenues is the first step in creating a P&L.

The numbers for the department profits include revenues as recorded in the Revenue section minus all the direct operating expenses and that leaves the department profit for each department. This will be presented in profit dollar numbers and the percentages represent the department profit percent. For example, if the Golf Club revenues were $300,000 and their profits were $85,000 the Golf Club profit percent would be 28.3%.

Total department profits is calculated by adding up all the individual department profits.

Department profits are a very important financial measure. They tell which departments are meeting profit expectations and which departments are not. Department profits are maximized by either maximizing revenues or minimizing expenses or in the best situation both. Department managers are expected to mange their revenues and expenses to meet financial expectations and provide good customer experiences. The department profits show how the period departments compare to budgeted profits and last years actual profits for both the current period and year-to-date.

The amount of Total Department Profits is the amount of money available to pay the other expenses of operating a resort. They will be covered in our next P&L section on expenses.

The Expense Departments are those operating departments that support the resort operations. They do not take in any revenue so are not Revenue and Profit Centers. Their budget consists of expenses to control. For example the G&A department contains

1. the wages and benefits for Accounting, Human Resources and the General Manager,
2. the operating expenses for these departments such as paper supplies, telephone expense, travel and other general expenses. Managers of Expense Departments contribute to profits by controlling their expenses and trying not to spend all of their budgeted dollars unless absolutely necessary.

Once you have completed this module you should:

Go on to Reading 3: Profits
or
Go back to Topic 2: Profit and Loss

E-mail Lloyd Shelton at Lloyd.Shelton@nau.edu
or call (928) 527-7518

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