Project TABLE OF CONTENTS INTRODUCTION 1 TASK 11 P1.1 Sources of funds which are available to service and business sector

Project TABLE OF CONTENTS INTRODUCTION 1 TASK 11 P1.1 Sources of funds which are available to service and business industry 1 P1.2 Contribution towards different methods of income generation 2 TASK 22 P2.1 Explaining the elements of cost, gross profit percentage and selling prices for goods and services 2 P2.2 Assessing methods of controlling stock and cash 3 TASK 34 P3.1 3.2 Assessing structure of trial balance and evaluating business accounts 4 P3.3 3.4 Discussing purpose and process of budgetary control in the firm

Project

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1.1 Sources of funds which are available to service and business industry.........................1
P1.2 Contribution towards different methods of income generation.....................................2
TASK 2............................................................................................................................................2
P2.1 Explaining the elements of cost, gross profit percentage and selling prices for goods and
services...................................................................................................................................2
P2.2 Assessing methods of controlling stock and cash..........................................................3
TASK 3............................................................................................................................................4
P3.1 3.2 Assessing structure of trial balance and evaluating business accounts....................4
P3.3 3.4 Discussing purpose and process of budgetary control in the firm and analysing
budgetary variances................................................................................................................5
TASK 4............................................................................................................................................8
P4.1 Calculation of financial ratios for the organization........................................................8
P4.2 Recommendation for future management strategies to improve performance of
organization............................................................................................................................8
TASK 5............................................................................................................................................8
P5.1 Categorizing cost as variable, fixed and semi-variable of the company........................8
P5.2 Calculating per product contributions and explaining relationship between cost/profit and
volume....................................................................................................................................9
P5.3 Use and significance of Break-Even analysis for taking short-term decision..............10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Finance is very important in every industry especially in service sector and in the
business of hospitality it has a lead role in creating revenue. In the present report there is brief
discussion about Belgravia Hotel and its sources of finance which are available to business and
industries with the major contribution of different methods for generating income. The business
has been understood with the perspective of different elements of cost and methods for
controlling cash and stock in the business. The report is giving discussion about various sources
and structure of trial balance with the proper evaluation of business accounts, notes and its
adjustments. Along with this, objective of budgetary control and its variances are elaborated.
Ratio analysis is the best possible way for analyzing the financial performance of the
organization and even the concept of marginal costing has been applied.
TASK 1
P1.1 Sources of funds which are available to service and business industry
For pertaining the financial requirement of business, there are different sources which are
available and they are classified in two categories that is internal sources of finance and external
sources of finance. Both the sources of funds are giving great advantage for accomplishing the
Belgravia hotel's capital requirement. In the same series internal sources are:
 Operating activities : It consists of various operational efforts like manufacturing the
products and services and how they are deal in the market. In the industry of hospitality it
is the most important aspect related to market and they have to work on the services
related to sale among each and every customers. The margin which is generated while
serving consumers it will be giving huge advantage for achieving satisfied amount of
profit (Quintana-García, Marchante-Lara and Benavides-Chicón, 2018).
 Owner's equity : It is considered as a very satisfactory and convenient source of
financing as it is not required for drafting return in capital which has been generated. The
partners and business owners of the organization will uplift all the personal savings
related to business operations which are very effective and initial source for collecting
amount of finance in every activity. The Belgravia hotel will be leading great growth in
capital structure if savings of owners and directors will be used in operational practices.
External sources of finance
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 Shareholder's equity : There funds helps the business for selling the equity ownership
of business in the present market. It has been recommended that Belgravia hotel should
perform the specific disclosure of the financial data base of their own organization which
will be attracting all the investors for pertaining interest to invest in their equity. They
may draft attractive dividend policies which will satisfy the investors for making trust
and loyalty with the perspective of business.
 Bank loan : It is refereed as borrowings which can be granted through several financial
institutions and banks against any assets or property of the organization. In the present
era, Belgravia hotel will gain specific amount of loans from financial institution and how
the interest payment will be paid at which duration.
P1.2 Contribution towards different methods of income generation
For attaining the activities related to business in that manner then sources of income will
be very beneficial to Belgravia hotels. There is need of sources of funds because they help in
earning extra income and it might be generated in the best possible way. The best quality of food
has been given by hotel in very effective manner and along with this, rooms with high end for
enhancing the satisfaction of customer very effectually (Denizci Guillet and Mohammed, 2015).
Their income will be enhanced and even sales will be maximised by giving various offers which
attracts the consumers in the best possible manner and along with this, discounts will be super
advantage to consumer. These both factors are mailed to each and every customer in very
effective manner. The consumers will be given new offers and technology has also helped the
industry for performing business in innovative way. The promotional tool is also implied that is
contests, social media and networking websites are also giving advantage for generating income
with so much ease.
TASK 2
P2.1 Explaining the elements of cost, gross profit percentage and selling prices for goods and
services
The Belgravia hotel incurs different cost like labour, material and overheads for setting
up the selling price of the goods in very effective manner. The main cost of hotel is considered as
material cost that is ingredients which are applied in flour for making bread. On its contrary
wages, salaries and bonus are considered as labour cost. There is presence of indirect expenditure
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as depreciation and in same series different overheads are marketing, maintenance cost and
administrative cost. By taking aggregate of all these costs, total cost has been calculated.
Along with all these costs, fixed expenditure and variable expenditure is also accounted.
The expenses which are incurred without considering sales which are attained in desired aspect.
In other words it can be justified that organization should incur the cost without observing
margins which has been gained (Cohen and Olsen, 2013). Variable expenditure leads to
production level which says that expenses can be decreased if there will be less volume of
production. Just a hypothetical example is undertaken that,
Purchase price 80
Kitchen percentage 160
gross profit 80
Gross profit percentage 50
Selling profit 130
Interpretation : Purchase price is 80 with the percentage of kitchen is 160 and
considering both gross profit will be evaluated (160-80). The gross profit will be transformed in
percentage by taking product of gross profit to 100 / kitchen percentage and it gives the outcome
as 50. For attaining the selling price the amount of purchase price and gross profit percentage has
been aggregated (80+50) as 130.
P2.2 Assessing methods of controlling stock and cash
The methods of controlling stock are listed below-
1. Economic Order Quantity (EOQ) -
The EOQ is termed as a model which is used to order inventory as per optimum order
size given by this method in effective manner. Mainly, costs of EOQ are ordering and holding
costs which are taken into consideration and as such, economic quantity is purchased without
involving any spoilage in the best possible manner. This method help to control upon wastage
that might occur when more quantity is ordered (Stock control and inventory. 2017). Hence, it is
useful technique for organization.
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2. Just in time (JIT) approach-
JIT approach is used to minimise inventory expenses and to maximise efficiency. This
method is quite helpful as waste is decreased by receiving only those items which are needed in
manufacturing process. Hereby, no spoilage or wastage is occurred as goods are needed on time
when actual requirement prevails. Hence, it is adequate method for controlling stock.
Methods of controlling cash are listed below-
1. Balancing-
The transactions that occurs on day-to-day basis in Belgravia Hotels should be accounted
for so that transparency and accuracy may be maintained. It is particularly required as when cash
is withdrawn, then entry should be made in accounting books and when cash receipt is there,
entry should be made accordingly (Liu and Pennington-Gray, 2015). Thus, balancing will help
business to effectively control cash.
2. Reconcile-
The balances occurred in the bank passbook and in accounting records of the entity
should be accounted for on monthly basis. It is required so that differences may be rectified in
both records.
TASK 3
P3.1 3.2 Assessing structure of trial balance and evaluating business accounts
The trial balance is one of the important statement in financial accounting which is done
to examine any arithmetical errors in accounting records of organization. In simpler words, trial
balance judges records entered in journal and entries posted in general ledger and as such,
mathematical errors if any can be easily extracted with the help of preparing such statements.
Hence, accuracy of transactions may be attained in the best possible manner and thus, final
accounts can be prepared quite effectually. Thus, preparation of trial balance help to remove
errors in effective way and organization can produce financial statements quite effectively. The
sources of trial balance are discussed below-
 Non-current assets are Equipment at cost, motor vehicles at cost
 Current assets are inventory, trade receivables, bank, prepayment (rent)
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 Non-current liabilities are Long-term loan 7 %
 Current liabilities are Trade payables, accrued interest and accrual telephone
P3.3 3.4 Discussing purpose and process of budgetary control in the firm and analysing
budgetary variances
The budget is termed as financial goal which is to be attained by organization so that it
may be able to earn profits by incurring necessary expenditures in the best possible manner
(Singal, 2014). It is clarified from the fact that Belgravia Hotels is required to effectively prepare
budgets as it will help to gain useful insight regarding future expenses that are required to be
incurred and profits will be made by incurring such expenditures in effectual way. This is
essentially required so that business may anticipate income that will be generated from the
expenditures that will be made and as such, performance can be enhanced in a better way by
taking into account future aspects of company's operations quite effectually. In relation to this,
budgetary control is used when for a particular year, budget is already prepared and as such,
comparison can be made with much ease. In addressing this, comparison means that planned
performance is compared with that of actual performance in order to analyse deviations if any
between these two quite effectively. The main purpose of budgetary control is to assess variances
that occurs in planned and actual output. It is done so that firm may be able to take corrective
action to remove such deviations and improvement can be done.
The budgetary control is used to assess deviations and thus, business performance can be
strengthened in the best possible manner. This is essentially required so that results may be
attained in relation to the expected income to be earned and expenditures to be incurred quite
effectually. Thus, Belgravia Hotels will be able to effectively utilised budgetary control by which
it may improve upon performance with much ease. Hence, purpose of this technique is to
effectively analyse variances and as such, improvement can be done with the help of taking
corrective action quite effectively (Kallmuenzer and Peters, 2018). In relation to this, process of
budgetary control is explained below-
Budget Committee- The decisions are assessed and made which are anticipated by company
that need to be made so that stated objectives can be attained quite effectually. In simpler words,
decisions are taken with main aspect of demand and need raised by various departments of firm.
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This is essentially required so that departments may perform well. Thus, in order to attain this,
budget committee is formed in effective way.
Budget Centres- In this process of budgetary control, costs are allocated to various departments
or units so that they may be able to achieve tasks with much ease. The centre is termed as a unit
and as such, costs are controlled in a better way. Thus, allocation of funds are made to units by
which operational activities can be accomplished by them.
Budget manuals- In respect to this, roles and responsibilities are provided with the help of
budget manual and as such, business is able to impart duties to the personnels. Moreover,
relationship between various personnels are also clarified in budget manual and thus, control can
be initiated to further stage.
Budget Officer appointed- At this stage, budget officer is appointed by Chief Executive Officer
(CEO) so that budget may be scrutinized in a better way (Kasemsap and et.al, 2018). The officer
scrutinizes budget prepared by executives for initiating improvement in the best possible manner.
Thus, business is able to clarify modifications to be made in budget so that variances can be
eradicated and improvement may be done quite effectually.
Budget Period- It is one of the important element as usually budget is prepared for specific time
of one year. This is done so that operational tasks can be performed in a better way by assessing
requirements of firm. On the other hand, period is also dependent upon numerous aspects
prevailing in particular industry.
Analysing key factor- This is the last process of budgetary control which is used to analyse any
key element that might affect Belgravia Hotels in the future course of action. The key factor need
to be analysed by which firm may be able to take corrective action for improvement quite
effectually.
Budget variances for Belgravia Hotels
Particulars Budgeted Actual
Hotel customers 20000 15000
£0.00 £0.00
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Revenue 2000 1700
Cost of revenue 1500 1390
Gross Profit 500 310
Expense of administration 200 210
Selling expenses 150 90
The budget variances are carried out which clearly indicates variances between actual and
planned activities. These are calculated below from the above table-
1. Revenue = Actual revenue – Planned revenue
= 1700 – 2000
= -300
2. Cost of revenue = Actual cost – Planned cost
= 1390 - 1500
= -110
3. Gross profit = Actual profit – Budgeted profit
= 310 - 500
= -190
4. Expenses of administration = Actual cost – Planned cost
= 210 – 200
= 10
5. Selling expenses = Actual expenses – Planned expenses
= 150 - 90
= 60
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The above calculated variances shows that firm needs to improve upon earnings capacity
so that it may be able to attain sales in a better way. This is essentially required as more profits
can be attained. It is evident from the revenue figure that the same is unfavourable because actual
revenue is less than planned one (Lado-Sestayo and et.al, 2016). Moreover, expenditures of
selling and administration are quite more. Thus, it is required that firm should initiate control
upon expenses so that profits may be maximised up to a high extent.
TASK 4
P4.1 Calculation of financial ratios for the organization
Particulars Formula 2017 2016
Gross profit ratio Gross profit /
Turnover * 100
59.00% 18.00%
Net profit ratio Net profit / Turnover *
100
54.00% 14.00%
ROCE Net Profit / Capital
Employed
8.00% 2.00%
P4.2 Recommendation for future management strategies to improve performance of organization
The profitability ratios are calculated for the firm highlighting financial health quite
effectually. Gross profit ratio was 18 % in 2016 which increased to 59 % in next year. This
shows that company is able to minimise operational expenses as gross profit is increased. On the
other hand, net profit ratio was 14 % in previous year which maximised to 54 % highlighting that
firm has good profitability position. ROCE (Return on Capital Employed) is calculated as it was
2 % in 2016 and increased to 8 % in 2017. This shows that firm is adequately utilising assets and
generating profits. It is recommended that organization should implement further strategies to
reduce costs to maximise profits quite effectually.
TASK 5
P5.1 Categorizing cost as variable, fixed and semi-variable of the company
There are various types of costs which are required to be incurred so that activities may
be initiated in a better way. Mainly, fixed, variable and semi-variable costs are incurred in the
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organization by which firm may be able to achieve tasks quite effectively (Claveria, Monte and
Torra, 2015). The table can be used to categorize various costs incurred by Belgravia Hotels in
the best possible manner.
Particulars Amount
Beds in the hotel 600
Selling price (SP) £40 per head
Wages Expense £400.00
Miscellaneous Expenses £40.00
Salary £80.00
Hotel rent £1,000.00
Electricity expenditures £500.00
Telephone expense £1,000.00
In relation to the above table, costs can be effectively categorized as fixed, variable and
semi-variable in effectual manner.
Fixed cost is Hotel rent
Variable costs are Wages Expense, Salary, Miscellaneous Expenses and Selling price (SP)
Semi-variable costs are Electricity expenditures and Telephone expense
P5.2 Calculating per product contributions and explaining relationship between cost/profit and
volume
Marginal costing
Sales revenue 24000
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Less: Variable costs
Wages Expense 400
Miscellaneous Expenses 40
Salary 80
520
Less: Semi variable costs
Electricity expenditures 500
Telephone expense 1000
Contribution 1500
Less: Fixed costs
Hotel rent 1000
Net Profit 500
The marginal costing statement is prepared showing expenses made and net profit
generated quite effectively. In relation to this, CVP (Cost Volume and Profit) analysis can be
attained by calculating break-even point with much ease. Thus, per product contribution is
computed below-
P/V (Profit Volume) ratio = Contribution / Sales revenue
= 1500 / 24000
= 0.06 %
P5.3 Use and significance of Break-Even analysis for taking short-term decision
Sales can be found out with the help of break-even point at which firm should attain so
that at least losses may not occur. In simpler words, at this point, no profit no loss is achieved by
company (Avilova, Ermakov and Gozalova, 2014). However, if it reaches beyond break-even,
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then losses occur. It can be analysed that break-even sales are at 2500 units and cost amounts to
50. Hence, firm need to produce at least 2500 units to achieve desired sales.
The significance of break-even analysis for making short-term decision is that business is
able to determine production level to accomplish sales in the best possible manner. This helps to
devise strategies so that adequate production volume may be attained maximising profits.
CONCLUSION
Hereby it can be concluded that finance plays crucial role in the hospitality sector so that
daily tasks may be attained in a better way. There are various sources of funds which are
required to attain finance. Elements of costs in setting selling prices plays important role.
Computation of ratios provides clarity regarding overall financial performance in effective way.
Budgetary control is vital for the business so that deviations may be analysed and improvement
can be done by taking corrective action quite effectively. Hence, finance is required in the
organization for achieving stated objectives.
REFERENCES
Books and Journals
Avilova, N. L., Ermakov, A. S. and Gozalova, M. R., 2014. An analysis of the international
customer attraction experience in the hospitality industry. World Applied Sciences
Journal,30(MCTT)), pp.84-86.
Claveria, O., Monte, E. and Torra, S., 2015. A new forecasting approach for the hospitality
industry. International Journal of Contemporary Hospitality Management, 27(7), pp.1520-
1538.
Cohen, J. F. and Olsen, K., 2013. The impacts of complementary information technology
resources on the service-profit chain and competitive performance of South African
hospitality firms. International journal of hospitality management. 34. pp.245-254.
Denizci Guillet, B. and Mohammed, I., 2015. Revenue management research in hospitality and
tourism: A critical review of current literature and suggestions for future
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research. International Journal of Contemporary Hospitality Management. 27(4). pp.526-
560.
Kallmuenzer, A. and Peters, M., 2018. Innovativeness and control mechanisms in tourism and
hospitality family firms: A comparative study. International Journal of Hospitality
Management, 70, pp.66-74.
Kasemsap, K. and et.al, 2018. Facilitating customer relationship management in modern
business. In Encyclopedia of Information Science and Technology, Fourth Edition (pp.
1594-1604). IGI Global.
Lado-Sestayo, R. and et.al, 2016. Impact of location on profitability in the Spanish hotel
sector. Tourism Management, 52, pp.405-415.
Liu, B. and Pennington-Gray, L., 2015. Bed bugs bite the hospitality industry? A framing
analysis of bed bug news coverage. Tourism Management, 48, pp.33-42.
Quintana-García, C., Marchante-Lara, M. and Benavides-Chicón, C.G., 2018. Social
responsibility and total quality in the hospitality industry: does gender matter?. Journal of
Sustainable Tourism. 26(5). pp.722-739.
Singal, M., 2014. The business case for diversity management in the hospitality
industry. International Journal of Hospitality Management, 40, pp.10-19.
Online
Elements of cost. 2018. [Online] Available Through: <http://smallbusiness.chron.com/element-
cost-management-accounting-67261.html>
Stock control and inventory, 2017. [Online] Available Through:
<https://www.nibusinessinfo.co.uk/content/stock-control-methods>
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