Explain the principles of accounting in tourism and hospitality businesses

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Finance Management in Tourism and Hospitality (OTHM/05/05-L5DTHM)

Qualification Number:  601/5661/2 

Credit Value: 20

Unit Reference Number : D/507/0027

Unit Aims :

This unit provides learners with an understanding of the fundamental principles of financial accounting and financial management in the tourism and hospitality industry. Learners will develop the ability to apply these principles to the work of managers in the tourism and hospitality environment. This unit should be studied within the contexts of local, national and international legal frameworks and good practice relating to finance.

Learning Outcomes

Assessment Criteria: Finance Management in Tourism and Hospitality (OTHM/05/05-L5DTHM)


1. Explain the principles of accounting in tourism and hospitality businesses

  • Define the purpose of accounting and finance management in the context of a tourism or hospitality organisation.
  • Critically analyse the difference between a sole trader, a partnership and a limited company
  • Explain how financial software can support Tourism and Hospitality business’ accounting functions.

2. Describe the principles and documents involved in financial transactions

  • Explain the rules of double-entry book-keeping and how it is used to maintain financial records
  • Describe how to calculate and correctly account for VAT on purchases and sales
  • Explain the role cash receipts, cash payments and bank reconciliation
Finance Management in Tourism and Hospitality (OTHM/05/05-L5DTHM)
Explain the principles of accounting in tourism and hospitality businesses

3. Explain how a trial balance and adjustments are used to prepare a statement of comprehensive income and a statement of financial

  • Explain how a trial balance is constructed.
  • Demonstrate how this trial balance along with adjustments is used to prepare a Trading, Profit and Loss account and a Balance Sheet.

4. Justify how an organisation should manage its working capital and the process of revenue

  • Describe the types and sources of finance available to a business and the ways in which a business raises capital
  • Explain the role of and the process of budgetary control and revenue management in a tourism or hospitality business
  • Demonstrate how to prepare a simple cash budget

Study contents 

  • Introduction to finance management
  • Introduction to management accounting
  • Different types of tourism and hospitality business structures: sole trader, limited company, partnerships
  • Types and sources of business finance
  • The role of financial software in tourism and hospitality businesses
  • Introduction to double entry book-keeping
  • Understanding and calculating VAT and sales taxes
  • Cash transactions and bank reconciliations
  • Constructing cash budgets
  • Constructing a trial balance
  • Profit and Loss accounts
  • Balance sheets
  • Performance management
  • Budget control and revenue management in the hospitality industry
  • Making decisions about investments in tourism and hospitality

Indicative Reading List

  • Chibili, M. (2010) Basic Management Accounting for the Hospitality Industry, Abingdon: Routledge
  • Guilding, C. (2013). Accounting Essentials for Hospitality Managers, Abingdon: Routledge
  • Hayes, D. & Millar, A. (2010) Revenue Management for the Hospitality Industry, Oxford: John Wiley & Sons
  • Explain the principles of accounting in tourism and hospitality businesses

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