This is the most important chapter in the book for a hospitality manager. The Profit and Loss (P&L) Statement is the financial statement that hospitality managers need to understand completely. It is the financial statement that they will use to measure the financial performance of their departments and to monitor and improve the daily operations of their departments. The P&L provides a way for managers to measure the financial performance of their departments by comparing actual monthly operations to the budget established for the month, to last year's monthly performance, to the previous month's performance, and to the most recent forecast.

The P&L is the financial report that involves hotel managers in all four steps of the Financial Management Cycle. First, the managers operate the departments that provide the products and services to customers that produce the numbers revenues, expenses, and profits. Second, the managers ensure that the numbers that are submitted to accounting are accurate and consistent so that the financial reports prepared by accounting are accurate and useful. Third, hotel managers must be able to analyze and discuss the numbers to determine how well hotel operations are meeting established goals and budgets. This includes providing critiques and details of operations that can assist them and accounting managers in determining the best or next course of action to take regarding operating their departments. Fourth, hotel managers are the ones responsible for applying the numbers back to operations by implementing changes for improvement or corrections to solve problems.

The P&L...