expert resturant accounting services

Restaurant Accounting – Complete Guide

Accounting for restaurants is an integral part of the business. Many factors affect your restaurant’s performance, but none more heavily than restaurant accounting. You may be working hard to provide an exceptional dining experience to your customers. However, juggling your restaurant’s accounting and bookkeeping may be difficult while managing the daily operations.

Tax regulations loom like a cloud, threatening to rain down confusion and penalties. Inventory management becomes a delicate dance, as the fear of wastage lurks around every corner.

And don’t even get us started about managing the ever-rising operational costs that eat up your hard-earned profit margins.

This guide turns up the heat on your restaurant’s finances! Learn the basics of accounting for restaurants and how you can streamline your operations to seasoned CPAs for restaurant accounting.

What is Restaurant Accounting?
what is resturant accounting

Restaurant accounting involves the management of the financial aspects of a restaurant. It includes recording and interpreting the financial transactions of the restaurant. The transactions are related to the operations, expenses, and sales.

If you properly maintain your restaurant’s accounts then you can make informed decisions, avoid complaints, and control costs (thus maximizing profits).

How is Accounting for Restaurants Different?

Unlike other food and beverage businesses, restaurants are in a unique position. They do not just sell food products, but a complete dining experience. This means that there are a ton more factors to consider. Paying for the venue, as well as waiters and chefs, for example. Then you have the cost of seating, lighting, and decoration. There are just too many additional moving parts that the rest of the food industry does not have to deal with. Which is why accounting for restaurants is a unique niche with special needs.

What are the Key Components of Accounting for Restaurants?

The following are the key components of restaurant accounting:


Bookkeeping forms the foundation of restaurant accounting. All the financial transactions in a restaurant will be recorded such as sales, purchases, expenses, and payments appropriately and accurately.

Bookkeeping is different from accounting. Bookkeeping involves tracking sales, purchases, payments, and receipts, and ensuring accurate financial records. On the other hand, accounting encompasses bookkeeping and analyzing data to identify trends, helping business owners make informed financial decisions.

Hence, accountants utilize bookkeepers’ information to create reports and budgets, and for cash flow management purposes.

Revenue Tracking

Tracking sales revenue is important for restaurants because it tells us the financial performance of the restaurant and helps us monitor the performance. Tracking revenue involves recording all income sources, such as food and beverage sales, catering services, and merchandise sales.

The profit margins from different revenue streams may vary so tracking them individually will help you to identify more profitable areas. You can also identify what costs are incurred more/less in which area.

Cost of Goods Sold (COGS) Calculation: 

COGS are the direct costs associated with producing the food and beverages served. So, it will include the cost of raw ingredients, beverages, and any other directly attributable costs.

Calculating COGS accurately is essential for determining the restaurant’s gross profit and identifying areas where cost-saving measures can be implemented.

Inventory Management

Effective inventory management ensures the restaurant has sufficient supplies to meet demand while minimizing waste and spoilage. Proper inventory level tracking helps control costs and prevent over-ordering or under-ordering of ingredients.

Ratliff, Andrea lists strategies restaurant business owners use to decrease food waste to maintain or increase profit in  Walden University ProQuest Dissertations Publishing, 2023.

How Do You Manage Food Spoilage in a Restaurant?

Spoilage in the restaurant industry is inevitable. You, as an owner, can put in measures to try and curb spoilage. Try is the key word here, because spoilage is not completely stoppable. And it isn’t enough to just throw spoiled food in the bin. Spoilt food has to be accounted for in your books using the appropriate accounting treatment.

Keep in mind that food spoilage costs are different from food waste. Spoilage happens when your restaurant’s food items (that were kept for customers’ dining) become unsuitable for consumption. There can be several reasons for this such as mishandling, expiration, etc.

Food wastage, however, happens when food is discarded during food preparation. So, for example, a chef is making a vegetable salad so the vegetable trimmings that are discarded will be considered food waste.

Properly tracking spoilage separately allows you to identify and address the root causes.

Food spoilage costs are calculated as the difference between the expected and actual closing inventory. To account for these costs in the books they are debited as a Food Spoilage Expense and credited from the appropriate inventory account.

Payroll and Labor Costs

Another significant expense for restaurants is the labor costs. Accounting for wages, salaries, taxes, superannuation and benefits accurately helps evaluate staff performance and overall operational efficiency.

Overhead and Operating Expenses

Beyond COGS and labor costs, restaurants have other operating expenses like rent, utilities, insurance, marketing, and maintenance. Tracking these expenses enables owners to understand the business’s overall financial health and identify areas where expenses can be reduced.

Cash Flow Management:

Maintaining a positive cash flow is essential for any business, and restaurants are no exception. Efficient accounting for restaurants helps track cash inflows and outflows, ensuring enough working capital to meet day-to-day expenses and investments.

One aspect of cash flow management is ensuring that your restaurant generates enough profit margins and looking for factors that may decrease the profit.

Learn cost control strategies effective for restaurants in this guide provided by the Restaurant Owner community.

Generating regular financial reports, such as income statements, balance sheets, and cash flow statements, allows restaurant owners and managers to evaluate the business’s performance, identify trends, and make data-driven decisions.

Check out the latest guide to learn how to master the basics of finance management.

Tax Compliance

Like any business, restaurants must comply with tax regulations. Proper accounting for restaurants ensures that taxes are calculated correctly and paid on time, preventing potential penalties and legal issues.

Budgeting and Forecasting

Creating budgets and forecasts based on historical data and market trends helps restaurant owners set financial goals and plan for future growth.

What is the Best Accounting Software for Restaurants?

Restaurant accounting software and cloud-based tools have become popular to streamline these processes and provide real-time data access.

QuickBooks financial software emerges as a crucial ally among the various tools available. With its versatile features, QuickBooks is a great choice for managing purchasing, bill payments, gift certificate tracking, cash flow, time tracking, and payroll.

How Can Outsourced Restaurant Accounting Services Benefit You?

In the challenging world of restaurants, where low margins and high stress prevail, many owners and operators question whether they can ever escape the cycle of runaway payroll and rising food and beverage costs. The thought of giving up may seem tempting.

With the right support and expertise restaurant owners can have a balanced book of accounts and the restaurant of their dreams!

You didn’t enter the hospitality industry to record entries and reconcile accounts, did you?

The key to successful accounting for restaurants is hiring the right professionals and employing the right tools based on your restaurant’s needs.

From Chaos to Control: How EA’s Staff Augmentation Restaurant Accounting Services Can Bring Harmony to Your Finances

By entrusting your accounting needs to seasoned CPAs for restaurants, you can focus on areas of core importance to your business every day.

EA’s reliable restaurant accounting services ensure that your accounting and bookkeeping are well-managed. Thus, providing you with the peace of mind and time to focus on your core activities. 

So, what are you waiting for? Set your restaurant’s finances on auto-pilot today. Let EA’s experts streamline your operations while you savor the taste of success.