Lezinah Ncube has just taken a new job as regional manager of a limited-service

Question

Lezinah Ncube has just taken a new job as regional manager of a limited-service hotel chain. Her region includes six hotels, with each hotel consisting of approximately 100 rooms. Each hotel also offers a small amount of meeting space and provides its overnight guests with a complimentary breakfast. Prior to this job, Lezinah served as a district manager for a national pizza company, where she was responsible for the supervision of ten stores. At the end of her first month’s work, Lezinah receives seven income statements; one for each individual hotel, as well as one consolidated income statement summarizing the overall financial performance of her six properties. Lezinah’s supervisor has asked her to comment on the financial results achieved by her region. 1. What specific differences will exist between the monthly income statements Lezinah must now analyze and those she likely reviewed in her previous food service job? .

Explanation / Answer

In the earlier job which Lezinah Ncube had as the district manager of ten pizza stores, the overall accounting was handled at the central level. She was only doing branch accounting, or a particular segment accounting, wherein the ten stores could be considered as a separate segment of business.

However, for the hotel, she has to handle the individual hotel chain segment reports, as well as the consoliated income statement for the hotel, pertaining to the particular region she has been assigned to. This means that the volume of work has increased, and also the inter-company transaction levels have gone up. In the earlier job, there could not be any inter-company transactions assumed, except on a minimum level. However, in this job, the six hotels will obviously be having inter-group transactions, which need to be eliminated by her while preparing the Consolidated Regional Statement.

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