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Accounting treatment for cafe restaurant

29 November 2021

a restaurant give a water bottle with every meal but a customer demand one more bottle and restaurants give it to the customer with charging any extra cost , so we do accounting for that

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9 Replies

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 29 November 2021

IF THE RESTAURANT OWNER DOES NOT WANT TO CHANGE MEAL COST AND RECOVER IT FROM OTHERS, IT IS A LOSS. IF THE OWNER WANTS TO RECOVER IT BY MARKING UP MEAL PRICE, YOU CAN INCREASE THE SALES VALUE BY ONE WATER BOTTLE SO THAT COGS WILL GIVE THE SAME RESULT. SUPPOSING WATER BOTTLE COST IS 10, MEALS IS 100, COGS IS 70, THEN

SALES 100

COGS 70

LOSS 10

GP 20

SALES 110

COGS 70

LOSS 10

GROSS PROFIT 30

30 IS THE USUAL PROFIT PER MEALS

Atharv Sankliya (1306 Points)
Replied 29 November 2021

Does the loss you mentioned above is debited to p&l a/c or trading a/c and what is title for this loss

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 29 November 2021

trading account is before gross profit. the title can be Distribution expenses.

Atharv Sankliya (1306 Points)
Replied 29 November 2021

No , distribution expense include delivery charge etc

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 29 November 2021

Free samples also can be included into distribution expenses. since we cant mention customer demanded, we use that heading

Atharv Sankliya (1306 Points)
Replied 29 November 2021

Ok thanks

1 Like

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 29 November 2021

If it is AS, it is advertisement expenses. I studied it as Distribution and marketing or advertising expenses.

Advertisement expenses a/c

To Purchases a/c

and

closing inventory is written off to COGS as per cost or nrv basis.

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 29 November 2021

If the water bottle is 10, and you sell it for 12, 10 must be subtracted from closing inventory and a loss of 12 rs must be subtracted from sales. I hope you got the picture. This is a good concept to understand adjusting.

Sales - 12

Distribution expenses - 10

Closing inventory - 10

Loss is 2 rs

Unfortunately, there is no double entry for sales and inventory as both credit and hence reconciled.

1 Like

ReynaldoRiggs (HD) (22 Points)
Replied 16 May 2022

So you will lose a lot of money! You have to change that! Water should be supplied only for a fee. I often meet restaurants on the verge of bankruptcy due to the inability to dispose of products properly. An experienced accountant will help you optimise inventory costs and increase revenue. My friend is the owner of https://tapatoro.restaurant/restaurants-near-convention-center/ restaurant, and with the help of an experienced accountant, he was able to bring his business to the highest level. By the way, the place is wonderful! In my opinion, a good combination of price and quality.