A Restaurant Chart of Accounts: Food, Assets, and Expenses

Accounting software can help manage revenue, losses, and inventory

Business owner working on a business plan for his restaurant
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Restaurant owners, especially when considering food and other appreciable assets, need to customize their accounting software's chart of accounts.

Note that, in relation to a chart of accounts, each restaurant handles the matter of food differently. There are three main ways to list food on a chart of accounts.

How to List Food in Accounts

The first, and by far the most common, way to list food is as a simple asset. This is the least accurate method for determining profit and waste, but it is often the most streamlined. A restaurant owner simply adds all the food expenditures for the month or accounting period, and lists the cumulative sum as a single expense. This method is fast but doesn't account for waste and spoilage. In this scenario, the restaurant owner liaisons with the executive chef, making that person directly responsible for excessive food waste.

Most small restaurants operate this way, because the approximation of waste is more cost-effective than tasking its monitoring day-to-day.

The second way to list food on the chart of accounts is, as previously mentioned, by monitoring waste, listing it as an operating expense directly under food expenditures. For small-scale operations, this method isn't popular because it takes time away from cooks, who are often spread thin already to keep wages low. The smaller restaurants that keep their books this way typically only deduct exceptional waste items like caviar, steak, cheese, etc.

This method, as the scale of the operation increases, becomes increasingly more common. There are variations, such as calculating median waste vs. purchase by weight, but those levels of monitoring are usually only seen in large-scale production facilities and fast-food chains.

The third is separating perishable and nonperishable items on the ledger. Then it is simply a matter of listing food into two categories, and deducting perishable waste only. This method can be time efficient and relatively accurate, but it doesn't take into account the loss of nonperishable items. An example would be listing a bottle of truffle oil as a nonperishable, but after three months the oil goes rancid, and 30 percent of the bottle is thrown away.

Compiling a Restaurant's Chart of Accounts

While not every restaurant owner will need to customize this chart of accounts, the following lists give a solid base for what to include for a restaurant's income statement.

Revenues

  • Beverage Sales
  • Food Sales
  • Other Sales, e.g., Offsite Catering, Speaking Engagements

Expenses

  • Cost of Beverage Sales
  • Cost of Food Sales
  • Any discounts given that even marginally affect bottom-line

Occupancy Expenses

  • Rent Expense
  • Insurance on Building
  • Security/Alarm Services
  • Janitorial
  • Building Repair and Maintenance (the costs of any routine repairs and maintenance are recorded in this account
    • Except repairs and maintenance expenses that can be capitalized to the fixed asset account because they extend the useful life of the asset
  • Property Taxes
  • Utilities
  • Disposal Services

Labor Expenses - Management

  • Officer Wages - Officer Salaries and Wages
  • Officer Benefits: Health Insurance
  • Officer Benefits: Meals and Discounts
  • Officer Benefits: Other
  • Management Wages - Management Salaries and Wages
  • Management Benefits: Health Insurance
  • Management Benefits: Meals and Discounts
  • Management Benefits: Other

Labor Expenses - General Employee

  • Employee Wages: Front of the House: Bartender
  • Employee Wages: Front of the House: Bussers
  • Employee Wages: Front of the House: Host/Hostess
  • Employee Wages: Front of the House: Servers
  • Employee Wages: Back of the House: Cooks
  • Employee Wages: Back of the House: Dishwashers
  • Employee Benefits: Health Insurance
  • Employee Benefits: Meals and Discounts
  • Employee Benefits: Other (employee benefits that do not fall into any other category are recorded in this account)

Operating Expenses

  • Bad Debt
  • Cash Over/Short
  • Credit Card Fees
  • Liability Insurance
  • Licenses and Permits
  • Corporate Taxes
  • Equipment Repairs and Maintenance
  • Equipment Lease
  • Glassware, Flatware, and Smallware
  • Marketing Expenses
  • Linens, Laundry, and Uniforms
  • Restaurant Décor
  • Menus and Drink Lists
  • Payroll Services Fees
  • Miscellaneous Expenses
  • Accounting Fees
  • Legal Fees
  • Tax Preparation Fees
  • Music and Entertainment
  • Telephone
  • Internet
  • Travel
  • Office Supplies
  • Bank Fees
  • Fines and Penalties
  • Postage and Mailing
  • Interest Expense
  • Depreciation Expense

This list for a restaurant highlights the most common income statement accounts that restaurants need to operate. The chart of accounts need to be customized to meet the unique needs of your organization, but serves as a starting point.