Independent restaurant owners often do their own bookkeeping˳ Even if they hire a professional accountant at year’s end, they may save considerable money by handling the weekly tasks themselves˳
Setting up a chart of accounts to fit the restaurant needs generally requires customizing the default choices of any accounting program˳ The selection of sales and cost of goods accounts on most systems does not provide for the separation of food and beverage categories that are needed˳
Even the leading bookkeeping program for small business, while it has a default selection for restaurants, fails to provide all of the accounts that most restaurant 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˳
The National Restaurant Association publishes a book titled Uniform System of Accounts for Restaurants˳ The book provides detailed descriptions of the application of generally accepted accounting principles to the restaurant industry˳
That book includes 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 restaurants will not use all of the categories listed, and it also notably lacks breakdown of inventory and cost categories beyond “food” and “beverage”˳ Many restaurant owners want further separation of those categories to include sub-categories such as “meat”, “seafood”, and “produce”, and possibly “beer” and “wine” for beverage categories˳
While many programs do not require the use of account numbers, the NRA book states that some type of account numbering 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 numbering system is generally grouped so that accounts of a particular type fall within a specific range of numbers˳ For example, assets may be in the 1000 range, and income accounts in the 4000 range˳ On systems with many detail accounts, 5 digit numbers may be used to allow more sub-categories, but that is rarely needed for a small restaurant˳
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 include 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 usually ordered, within 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 merchant deposits take a few days to reach the bank, a merchant 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 normally 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 another account later and squeeze it in to the sort order in any position˳
The asset 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 lifespan of several years or more are referred to as Long Term Assets˳ This also includes any real estate˳
- 1500 Fixed assets
- 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 includes things like credit cards and payables to vendors˳ It also includes money that has been received for things like tax that is due to the state, tips due to the employees, and gift cards sold but not yet redeemed˳ Real estate loans and other major financing 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 cards & certificates
- 2350 Customer Credits
- 2400 Notes Payable
- 2500 Other debt
Equity Accounts
The owners’ investment in the company is represented in the equity accounts˳ For a corporation, this includes 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 restaurant will obviously want separate categories for food and beverage sales, and may want further separation of beer, wine, and liquor sales˳
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 include income from sources such as cover charges, games or vending 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 smaller 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 in the middle of the range from COGS through expenses˳ A single account has been placed in this list within the 4000 range˳
Putting the discounts into the revenue category implies that this will be a “contra” account˳ Where most of the sales categories will have a credit balance, discounts will normally 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 beverage purchases to provide the meals˳ Other expenses directly related to sales may be included, such as merchant fees or consumable cups and napkins˳
The numbers used here also provide consistency across 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 include:
- 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 grouped in the 6000 range, with the other operating expenses in the 7000 range˳ Overhead like rent, taxes, and amortization are bumped into the 8000 range˳
While accounts must be broken down at least 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 accountant 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 remaining items to account for are the sale of major assets, other income from sources besides restaurant operations (such as investments or sub-letting space), and a placeholder account for transactions where the business owner needs their accountant’s assistance˳
- 9500 Gain/Loss on sale of assets
- 9900 Other Income (not from operation
- 9999 Ask My Accountant
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