Accounting and Financial Management for Travel Agencies
Module 1: An Introduction to Accounting and Financial Management
Unit 3: Reading your Profit and Loss Statement
Learning Objectives
‚‚Describe the key components of a
profit and loss statement
‚‚Account for revenue and expenses
‚‚Adjust for accruals, prepayments,
depreciation, and taxes
‚‚Explain the difference between
agents and principals
Key Learning Points
3.1 • An agency is profitable if revenue is greater than expenses.
If expenses are greater, then the agency is operating at
•
a loss.
In a profit and loss statement, gross profit is the total
revenue minus the total cost of sales.
• Operating profit is the gross profit minus overhead
3.2
expenses.
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• Businesses should split their expenses into fixed and
variable costs.
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3.3 • With accruals, businesses account for transactions when
they affect the business, not when payment is sent
or received.
• Companies need to adjust for:
|| Accrued expenses, which occur when the company
uses products or services before they pay for them
|| Prepayments, which occur when a company pays for
products or services before they use them
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3.4 • Depreciation is for tangible assets, while amortization is for
intangible assets.
• Depreciation and amortization spread the cost of a non-
current asset over its useful economic life.
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3.5 • In the profit and loss statement:
|| Payroll taxes are recorded as expenses along with
wages and salaries.
|| Direct taxes are included in the tax section.
|| Indirect taxes are collected on behalf of the
government, and are therefore not recorded
as revenue.
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3.6 • When acting as an agent, only the commission or
fee should be counted as revenue, excluding the
full sales value.
• When acting as the principal, the full sale value is
recorded as revenue. Airline, hotel, and other costs
are recorded as expenses.
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