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Chapter 14: Managerial Accounting in Casinos
- University of Nevada Press
- Chapter
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The traditional objectives of casino accounting usually focus on safeguarding assets and assuring accurate financial statements. However, increasingly, accounting systems are being called upon to provide analysis of data for managerial decision making and measuring management performance. These areas are usually described as managerial accounting as opposed to financial accounting. managerial accounting — accounting to assist management An emerging area of concern in casino accounting is the maintenance of various accounting systems to provide information for use by management. The issues of managerial accounting in the casino industry are considerably less understood than in many other industries or businesses. The lack of a traditional manufacturing environment and, perhaps, the unique aspects of its services have contributed to the lack of in-depth managerial accounting practice in the industry. Providing information to assist management can be categorized in three sets of accounting processes. The first set is described as attention-directing accounting processes, which bring information to the attention of management. Often these attention-directing processes are part of, support, or are attached to, the traditional accounting system. Sometimes they exist as separate standalone systems. The second set is described as planning and control accounting processes. These processes assist management in areas such as budgeting and cost controls throughout the casino and related business operations. The third set could be described as decision-making accounting processes. This type of inc h a p t e r 1 4 Managerial Accounting in Casinos Managerial Accounting 387 formation provides input to various decisions that the casino management must make. These decisions include short- and intermediate-term decisions, as well as support for long-term strategic decision making. Attention Directing The attention-directing issues of accounting for a casino operation are focused in several areas. The most common application is specific, detailed cost tracking or cost analysis of a particular part of the casino (for example, the keno department) or of a specific activity (such as the profitability of a junket or bus program).1 Analyses such as these give rise to various accounting and record-keeping systems that, while not a formal part of the accounting system, are nonetheless very necessary. Another example in this area is a player control system that not only records the amount of credit issued but also determines the extent and quality of the play (including amount wagered, duration of play, and so on) of the various customers. Another category consists of complementaries : record keeping of the total costs incurred by a particular complimentary customer or the total cost of a junket or bus tour when related to the amounts wagered by those junket or bus tour customers. Other types of attention-directing decisions might include the use of breakeven analysis and cost-volume profit calculations, which focus attention on cost behavior and might lead to a better understanding of casino cost behavior . Major contributions of accounting systems lie in cost-finding analysis for new games, assessing the cost impacts of revised operating procedures for the casino games, and analyzing relative profitability of junkets, bus programs, or complimentary programs. In addition to these traditional managerial accounting areas, the use of various forms of departmental income statements is also important to hotelcasino operations. In many cases, the food-and-beverage and hotel departments exist to support the primary revenue generation of the casino. As a result, there is an expectation that the food and beverage department will lose money, largely due to the high level of complimentary services rendered. The use of supporting departmental profit and loss statements can help in controlling costs in the absence of a dedicated profit motive. (The objective is no longer generation of profits, but cost containment.) Another way that managerial accounting can make a contribution is by providing departmental profit and loss statements on a contribution-margin approach. This contribution margin (or variations such as variable costing reports ) could help the departments recognize their contributions to the overall hotel-casino profitability, while not confusing the actual operating results with numerous fixed costs or allocations of costs from other departments. By using the contribution-margin approach, there is an implicit recognition that [52.90.50.252] Project MUSE (2024-03-28 11:13 GMT) 388 Auditing, Taxation, and Management certain costs are controlled at the top management level and should not be charged against the individual department.2 Planning and Control Processes A second area of management accounting is the development and use of various...