The Uniform

System of
Accounts
For Restaurants
A Trade Secrets Special
Report From Bill Main

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The Uniform System Of Accounts For Restaurants

For today's independent or chain restaurant, profitability rarely occurs by
accident. Rather, making money in this most difficult of businesses is the result of
a singular dedication to organization at every level of the restaurant. This is never
easy, as restaurants are by definition complicated and irrational creatures
requiring constant attention to detail. Further, managers must be prepared to
solve problems by improvising on a moment's notice. That is the essence of
serving the public in such a dynamic and fast paced environment as a restaurant,
whose natural order is often disorder. O'Toole's corollary to Murphy's Law says it
best: "Murphy was an optimist!"
As a result, maintaining a reasonable level of organization in a restaurant
requires a religious, almost fanatical commitment to the consistent execution of
fundamental business principles. Such devotion must start with the recognition
that "the numbers" are the ultimate measure of profitability, and as such must be
organized and presented in a manner that allows for objective and detailed
analysis and review. To be profitable, an owner or manager simply must have a
reasonable grasp of the numbers and their implications for informed decision
making. I call this phenomenon the "profitability mindset."
First things first, however. Let's be clear that in any successful restaurant, the
first two priorities are always the customer and the employee, in that order. If
their needs are being met, profits are likely to follow. But profits also depend on
maintaining an organizational climate conducive to profitability. The first step in
this process always lies in the establishment of a sensible financial reporting
format. Today's restaurateurs must be able to monitor the ebb and flow of
revenue and expense as presented in their statement of profit and loss. They
must be able to see where they stand in terms of controlling food, beverage and
labor costs as well as other expenses attendant to the effective day-to-day
operation of the restaurant.

A Pro Active Step

To this end, I recommend adoption of the Uniform System of Accounts for
Restaurants. It was first developed in 1930 by the National Restaurant
Association in conjunction with Laventhol and Horwath, an international
accounting firm specializing in the hospitality industry. At that time, it was
recognized that there would be rapid growth in the restaurant industry through
the development of new food products, improvements in supplies and equipment,
as well as new methods of purchasing and packaging. The market was changing,
too. Super highways, airports and suburban shopping areas suggested
significant changes in spending patterns. Lastly, the growth of government
regulatory policy in the areas of tax regulation and wage and hour laws
suggested a need for a standardized financial reporting system sensitive to the

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impact these various advances would have on operating characteristics and the
presentation of operating results. It was also recognized that, to be universally
accepted, such a system would require periodic review and modification so as to
be responsive to the needs of an evolving industry.

A Financial Reporting Blueprint

The Uniform system of Accounts for Restaurants is akin to a reference textbook
on the subject of restaurant accounting. It provides a common financial language
to the industry, allowing restaurants large and small to more precisely interpret
their operating results and financial position. It provides a comprehensive set of
guidelines for financial reporting formats, offering a standardized, restaurantspecific chart of accounts with detailed instructions as to the proper classification
of revenue, expense, asset, liability and equity items associated with the
preparation of financial statements. Of specific interest, of course, is the
Statement of Income and Expenses. Additionally, the structure of the Uniform
System conforms readily to accounting disciplines set forth by generally accepted
accounting principles (GAAP). It also contains a section on record keeping
systems for a small restaurant as well as a helpful synopsis on food and
beverage cost controls.

Easy To Use
From an operator's perspective, the Uniform System is easy to use. No longer
must you rely on your accountant to explain the underlying rationale behind the
presentation format of your financial statements. Classification of each monetary
expense is simple. Based on the guidelines set forth in the Uniform System, each
different operating cost is assigned to a specific expense account (e.g., linen
rental, contract cleaning, china, etc.), which is part of a specific expense class or
group (e.g., Employee Benefits or Direct Operating Expenses). It is a beautifully
logical system, allowing each individual itemized cost to easily flow into its
designated expense account and then be summarized in its appropriate expense
group.

Comparison To Industry Averages

Typically, published restaurant industry averages follow the Uniform System.
They are compiled using historical data contributed from restaurants representing
a broad cross section of concepts, locations and volume ranges. Therefore, once
the Uniform System is in place in an operation, restaurant owners and managers
have the ability to compare their profit performance and cost ratios to industry
standards on an "apples versus apples" basis. The best source of industry
averages is the National Restaurant Association's "Restaurant Industry

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Operations Report" published bi-annually in conjunction with Deloitte & Touche,

Restaurant/Entertainment Advisors.

Best Seller
Not surprisingly, the Uniform System of Accounts for Restaurants is historically a
top-selling publication in the National Restaurant Association's library. This
continuing demand is evidence of the restaurant industry's need and acceptance
of a publication that has had such a significant impact on the organizational
climate of foodservice establishments across the country. The publications can
be purchased from the National Restaurant Associations on-line store
(www.restaurant.org/store).
Adoption of the Uniform System of Accounts for Restaurants is a vitally important
first step towards developing the "profitability mindset," and is recommended for
all serious practitioners in the restaurant industry.

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SAMPLE CHART OF ACCOUNTS

BALANCE SHEET ACCOUNTS

ASSETS
1010
1015
1020
1110
1115
1120
1210
1250
1310
1320
1330
1410

Current Assets
Cash on Hand
Cash in Bank - General Checking
Cash in Bank - High-Yield Checking
Accounts Receivable - Trade
Accounts Receivable - Owner/Employee
Accounts Receivable - Credit Cards
Food Inventory
Beverage Inventory
Prepaid Taxes
Prepaid Insurance
Prepaid Miscellaneous Expenses
Note Receivable - Current Portion

1510
1511
1610
1611
1660
1670

Fixed Assets
Leasehold Improvements
Accumulated Amortization - L/H Imp
Furniture, Fixtures & Equipment
Accumulated Depreciation - FF&E
China, Glass, Flatware Par
Small Equipment Par

1910
1920
1930
1940
1950

Other Assets
Deposits Paid
Liquor License
Organizational Expenses
Logo/Artwork
Note Receivable - Long Term Portion

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LIABILITIES & EQUITY

2010
2020
2030
2040
2110
2115
2120
2130
2135
2140
2145
2210
2215

Current Liabilities
Accounts Payable - Trade
Accounts Payable - Other
Gift Certificates Outstanding
Deposits Held
Sales Tax Payable
Payroll Taxes Payable
Other Taxes Payable
Accrued Insurance
Accrued Payroll
Accrued Rent
Accrued Miscellaneous Expenses
Note/Loan Payable - Current Portion
Note/Loan Payable - Current Portion

2310
2315

Long Term Liabilities

Note/Loan Payable - Long Term Portion
Note/Loan Payable - Long Term Portion

2410
2420

Other Liabilities
Other Notes
Shareholder Notes

3100
3899
3900

Shareholders' Equity
Capital Stock
Retained Earnings - Prior Years
Current Profit/Loss(-)

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INCOME & EXPENSE ACCOUNTS

4010
4020
4030

Revenue
Food Sales
Liquor/Beer /Misc. Bar Sales
Wine Sales

5010
5020
5030

Cost of Sales
Food Cost
Liquor/Beer /Misc. Bar Cost
Wine Cost

5110
5120
5130
5140
5150
5155

Salaries & Wages

Administrative Wages
Bar Wages
Kitchen Wages
Restaurant Wages
Bonuses & Incentives
Vacation Pay

5165
5170
5175
5180
5185

Employee Benefits
Employer Payroll Tax Expense
Workers' Compensation Insurance
Medical & Dental Insurance
Employee Meals (cost)
Miscellaneous Employee Benefits

5210
5215
5220
5225
5230
5235
5240
5245
5250
5255
5260
5265
5270

Direct Operating Expenses

Auto/Gas Expense - Operations
China/Glass/Flatware Replacement
Contract Cleaning/Janitorial Service
Decorations
Laundry/Linen
Licenses/Permits
Menus and Wine Lists
Supplies - Banquet/Catering
Supplies - Bar
Supplies - Cleaning/Janitorial
Supplies - Kitchen
Supplies - Restaurant
Uniforms

5300

Music & Entertainment

(see detail list)

5320
5325
5330
5335
5340
5345
5350
5355
5360
5365

Marketing
Complimentary Food & Beverage (cost)
Donations/Charities
Media Advertising
Other Promotional Expenses
Postage/Delivery (promo)
Photo/Printing/Graphics
Programs & Directories
Restaurant Research & Development
Signature Souvenirs
Telephone (promo)

5410
5420
5430
5440

Utility Services
Electricity
Natural Gas/Fuel
Scavenger/Waste Removal
Water & Sewage

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5510
5520
5530
5540
5550

Occupancy Costs
Rent/Lease (Premises)
Equipment Lease
Property Taxes
Insurance - Property
Other Taxes

5610
5620
5630
5640
5650

Repairs & Maintenance

Grounds/Gardening
Maintenance Contracts-Equipment
Repairs & Maintenance-Equipment
Repairs & Maintenance-Premises
Miscellaneous Repairs & Maintenance

5710
5720

Depreciation & Amortization

Depreciation Expense
Amortization Expense

5810
5820
5830
5831
5840
5841
5850

Other (Income)/Expense
Interest Income
Room Rental Fees
Gifts/Novelties Sales
Gifts/Novelties Costs
Telephone Coin Box Commissions
Discounts Taken
Miscellaneous Income

5910
5913
5916
5919
5922
5925
5928
5931
5934
5937
5940
5943
5946
5949
5952
5955
5958
5961
5964
5967
5970
5973
5976

Administrative & General

Auto/Mileage Allowance
Bad Debt Expense
Bank Charges
Cash Over/Short
Computer Supplies
Credit Card Discounts
Dues and Subscriptions
Educational Materials
Entertainment (Business Operation)
Forms/Paper Products/Printing (A&G)
Insurance-Liability/Umbrella
Insurance-Miscellaneous
Legal/Accounting Professional Services
Management Fees
Miscellaneous Expenses
Office Supplies
Outside Services
Personnel Expenses
Postage/Delivery (A&G)
Security/Alarm
Seminars/Conventions
Telephone/Communications
Travel Expenses

6100
6300
6400

Interest & Non-Operating Exp.

Interest Expense
Officers' Salaries & Benefits
Corporate Office Expenses

6900
6950

Income Taxes
State Income Tax
Federal Income Tax

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ACCOUNTS DETAIL
DIRECT OPERATING EXPENSES
Auto/Gas Expense - Operations
gas, oil, repairs & maintenance for vehicles
used for deliveries and operations' errands
mileage reimbursements (operations)
China/Glass/Flatware Replacement
China serving and table ware
Glassware for both bar and dining room
[Table Linen and Napkins, if purchased]
Contract Cleaning/Janitorial Service
Decorations
Decorative pillows, etc.
Flowers for tables (fresh and artificial)
Holiday decorations
Wall hangings, pictures, etc
Equipment Rental - Operations
Credit Card Authorization Terminals
Credit Card Imprinters
Equipment/Supplies Rental (short-term)
Laundry/Linen
Laundering costs of:
kitchen aprons/hats/shirts
table linens, napkins
towels
Rental costs of the above
Licenses/Permits
Liquor license renewal fee
Health inspection fee, Scale inspection fee
Outdoor advertising permit
Menus and Wine Lists
Design/printing costs of:
drink lists, table tents
menus, wine lists
Menu Covers
Supplies-Banquet/Catering
Any supply/decoration/expense used or
incurred solely for banquets/catering

Supplies-Cleaning/Janitorial
Bleach, cleanser, degreaser
Brooms/Mops
Dishwashing Supplies
Paper Towels
Rubber Gloves
Sponges/Scouring Pads
Toilet Paper, Toilet Seat Covers
Trash Can Liners
Supplies-Kitchen
Can Openers
Coffee Filters
Cooking Utensils, such as:
fry baskets
ladles/skimmers
mixing bowls, mixing/serving spoons
pans/pots
Foil Wrap
Grill Screens
Knives/Cleavers, Sharpening Steel
Oven Mitts
Plastic Aprons
Plastic Bags, Plastic Wrap
Portion Cups
Waxed Paper
Supplies-Restaurant
Birthday Candles
Cork Trays
Doilies
Guest Checks
Light Bulbs (decorative)
Matches
Take-Out Containers
Uniforms
Aprons/Smocks
Badges
Blouses/Shirts
Caps/Hats/Hairnets
Dresses/Suits/Trousers
Shoes
Ties
Uniform cleaning/repairs

Supplies-Bar
Ashtrays
CO2 (soft drink dispenser)
Corkscrews/Bottle Openers
Gratis snacks (nuts/pop corn/etc.)
Paper/Beverage Napkins
Shakers
Strainers/Fruit Squeezers
Straws/Swizzle Sticks/Toothpicks
Venetian Blue Candles

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MUSIC & ENTERTAINMENT

Orchestras and Musicians
Professional Entertainers
Mechanical Music
Muzak or Other Wire Services
Piano Rental and Tuning
Films, Records, Sheet Music
Programs
Royalties (e.g., to ASCAP)
Booking Agent's Fees
Meals Served (cost) to Entertainers

UTILITY SERVICES
Electricity
Natural Gas/Fuel
Scavenger/Waste Removal
Water & Sewage
The Uniform System of Accounts for Restaurants
(USAR) states that kitchen usage of Electricity and
Natural Gas/Fuel should be metered separately and
charged to Direct Operating Expenses as "Kitchen
Fuel". If separate meters do not exist, ALL electricity/natural gas/fuel costs should be expensed here.
Normally, Electric Bulbs are expensed here. The
replacement bulbs in this sample are decorative;
therefore, they are charged to Restaurant Supplies.

MARKETING
Complimentary Food & Beverage
Cost of gratis meals to customers
Cost of gratis alcoholic beverages to
customers, plus sales tax (if applicable)
Donations/Charities
Cash donations to:
Charities/Community Groups
Financial Sponsorship of activities such as
Little League
Media Advertising
Newspapers/Magazines
Radio
Television
Other Promotional Expenses
Civic and Community Projects/Involvement:
Chamber of Commerce membership
Meetings of committees, etc
Entertaining Costs in Promotion of Business
Travel Expense on Solicitation
Other Misc. Promotional Expenses
Postage/Delivery (Promo)
Bulk Mailing
Postage Meter usage
Promo Mailing Supplies, such as labels
Photo/Printing/Graphics
Customer Survey Forms
Customer Post Cards
Customer Mailers/Direct Mail Ads

REPAIRS & MAINTENANCE

Grounds/Gardening
Maintenance Contracts - Equipment
Comupter Hardware and Software
Typewriters, Copy Machines
Time Clock, Point-of-Sale
Repairs & Maintenance - Equipment
Dining Room Furniture; Upholstering
Dishwashing & Sanitation Equipment
Kitchen, Bar, Office Equipment
Refrigeration Equipment

Programs & Directories

Travel/Dining Guide Listings
Yellow Page Ad in phone directory
Restaurant Research & Development
"Sampling" at Other Restaurants:
Local Competition Research
Menu/Decor/Operation Ideas
Signature Souvenirs
Gratis souvenirs given to customers
Telephone (Promo)

Repairs & Maintenance - Premises

Air Conditioning, Plumbing, Heating, Electrical
Elevators and Lifts
Floors and Floor Coverings
Parking Lot Repairs
Buildings; Building Alterations not capitalized
Miscellaneous Repairs & Maintenance
Storage Containers
Pest Control
Small repair tools/supplies not capitalized

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GENERAL & ADMINISTRATIVE

Auto/Mileage Allowance
Auto allowances paid to authorized management
personnel as part of compensation package
Mileage reimbursements for use of employee
vehicles for administrative-related errands
Bad Debt Expense
Customer and Trade "Uncollectibles":
Checks
Credit Card Charges
Receivables
Customer Walk-Outs
Bank Charges
Account Service Charges/"Analyses"
NSF Fees/Returned Item Charges
Stop Payment Charges
[Credit Card Imprinters/Authorization
Terminals are charged to Dir. Op. Exp.]
Cash Over/Short
Petty Cash/Change Bank overages/shortages
Bartender/Waitron overages/shortages (incl.
the reimbursement/paid-out of same)
Computer Supplies
Computer paper, ribbons, blank disks, etc.
Program software "update" costs
Misc. software/hardware purchases which
are not capitalized
Credit Card Discounts
Dues and Subscriptions
CRA and/or NRA Membership fees
Other trade/business organization dues/fees
Trade Papers/Magazines Subscriptions

Insurance-Liability/Umbrella
Liquor Liability coverage
General Liability coverage
Umbrella (Excess Liability) coverage
Insurance-Miscellaneous
Officers' Life Insurance
Miscellaneous Insurance
Legal/Accounting Professional Services
Legal Fees
Accounting Service Fees (e.g., CPA)
Miscellaneous

Expenses

Office Supplies
Pens/Pencils
Calculator/Cash Register Tape, Ribbon, etc.
Scotch Tape/Staples/Paper Clips
Typewriter Supplies
White Out, Post Its, Memo Pads
File Folders, Labels, etc.
Small Equipment not capitalized
Outside Services
ADP Unemployment Insurance Cost control
Consultant Fees
Payroll Service costs
Personnel Expenses
Help wanted advertising
Personnel agency fees
All other recruitment costs
Postage/Delivery (A&G only)
Postage Meter refill, stamps
Federal Express, Express Mail, U.P.S.

Educational Materials
Cookbooks (used for reference only)
Dictionary, Thesaurus, etc.
Instruction Books/Pamphlets (e.g., for computer
programs, or accounting procedures, etc.)

Rent-Other
Postage Meter rental
Typewriter rental (short-term)

Entertainment (Business Operation)

Administrative Staff luncheons
Managers Dinner
Meals/Entertainment: Purveyors, Business
Contacts, Executive "meetings", etc.

Seminars/Conventions
Fees (Entrance and Attendance)

Forms/Paper Products/Printing (A&G)

Check Printing
Photocopy Supplies-paper, toner, dispersant
Printing costs-handbooks, manuals, forms
for both operations and accounting
Stationery Supplies-envelopes/letterhead/etc.
Facsimile supplies

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Security/Alarm

Telephone/Communications
All telephone, facsimile, modem costs, except
those expensed to "Marketing"
Travel Expenses
Business travel expenses, with the exception
of travel expenses on solicitation (which are
expensed to "Marketing"):
Mileage
Meals & Lodgings
Bridge Tolls, Car Fare, Parking

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BALANCE SHEET FORMAT

ASSETS

LIABILITIES & EQUITY

Current Assets
Cash on Hand
Cash in Bank - General Checking
Cash in Bank - High-Yield Checking
Accounts Receivable - Trade
Accounts Receivable - Owner/Employee
Accounts Receivable - Credit Cards
Food Inventory
Beverage Inventory
Prepaid Taxes
Prepaid Insurance
Prepaid Miscellaneous Expenses
Note Receivable - Current Portion
Total Current Assets

XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX

Fixed Assets
Leasehold Improvements
Accumulated Amortization - L/H Imp.
Furniture Fixtures & Equipment
Accumulated Depreciation - FF&E
China, Glass, Flatware Par
Small Equipment Par
Total Fixed Assets

XXX
XXX
XXX
XXX
XXX
XXX
XXX

Other Assets
Deposits Paid
Liquor License
Organizational Expenses
Logo/Artwork
Note Receivable - Long Term Portion
Total Other Assets

XXX
XXX
XXX
XXX
XXX
XXX

Total Assets

XXX

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Current Liabilities
Accounts Payable - Trade
Accounts Payable - Other
Gift Certificates Outstanding
Deposits Held
Sales Tax Payable
Payroll Taxes Payable
Accrued Insurance
Accrued Payroll
Accrued Rent
Accrued Miscellaneous Expenses
Note/Loan Payable - Current Portion
Note/Loan Payable - Current Portion
Total Current Liabilities

XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX

Long Term Liabilities

Note/Loan Payable - Long Term Portion
Note/Loan Payable - Long Term Portion
Total Long Term Liabilities

XXX
XXX
XXX

Other Notes/Loans Payable

XXX

Total Liabilities

XXX

Shareholders' Equity
Capital Stock
Retained Earnings - Prior Years
Current Profit / Loss (-)
Total Shareholders' Equity

XXX
XXX
XXX
XXX

Total Liabilities and

Shareholders' Equity

XXX

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SUMMARY INCOME STATEMENT FORMAT

Current
Period

% of
Sales

Year-ToDate

% of
Sales

Revenue
Food Sales
Beverage Sales
Total Revenue

XXX
XXX
XXX

XX
XX
XX

XXX
XXX
XXX

XX
XX
XX

Cost of Sales
Food Cost
Beverage Cost
Total Cost of Sales

XXX
XXX
XXX

XX
XX
XX

XXX
XXX
XXX

XX
XX
XX

Gross Profit

XXX

XX

XXX

XX

Operating Expenses
Salaries & Wages
Employee Benefits
Direct Operating Expenses
Music & Entertainment
Marketing
Utility Services
Occupancy Costs
Repairs & Maintenance
Depreciation & Amortization
Other (Income)/Expense
General & Administrative
Total Operating Expenses

XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX

XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX

XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX

XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX

Income Before Interest &

Non-Operating Expenses

XXX

XX

XXX

XX

Interest & Non-Operating Expenses

Interest Expense
Other Expenses
Total Interest & Non-Op Expenses

XXX
XXX
XXX

XX
XX
XX

XXX
XXX
XXX

XX
XX
XX

Income Before Income Taxes

XXX

XX

XXX

XX

Income Taxes

XXX

XX

XXX

XX

Net Profit or (Loss)

XXX

XX

XXX

XX

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