This document provides an overview of hotel front office accounting. It defines accounting and discusses the purpose of accounting in providing financial information to a company. It also discusses key accounting terms and concepts like assets, liabilities, owner's equity, debits, credits, accounts receivable, accounts payable, retained earnings, and the uniform system of accounts for the lodging industry. The document then explains the major functions of front office accounting including maintaining guest and non-guest accounts, tracking financial transactions, and providing management information.

1. Welcome to a
new learning
session!
Knowledge is Money.

2. Fundamentals of
Hotel Front Office
Accounting

4. Imagine a world without order, where
everything was a mess and no one knew
where anything was! Where money and
resources were being thrown about in all
directions, without knowing or caring!
How much was spent, how much was left,
or even where it went to!
This wouldn’t be very sustainable, not to
mention, comfortable?

7. Now imagine if this was in a hotel
environment; how could you even
accommodate guests!?
Hotel staff wouldn’t get their salaries,
guests wouldn’t get what they paid for,
no improvements would take place, and
money would just disappear!
That doesn’t sound too good, does it?

10. Definition: Accounting
It is a systematic process of identifying,
recording, measuring, classifying, verifying,
summarizing, interpreting and
communicating financial information.
It reveals profit or loss for a given period, and
the value and nature of a firm's assets,
liabilities and owners' equity.
Read more:
http://www.businessdictionary.com/
definition/accounting.html

12. Accounting: Purpose
• Accounting provides information to the
Company on following.
– Resources (money, capital, manpower etc.)
available to a firm.
– The means employed to finance those resources.
– The results achieved through their use.

14. Accounting: Practice and Body of
Knowledge
Concerned primarily with:
-Methods for recording transactions,
-Keeping financial records,
-Performing internal audits (checks),
-Analyzing and reporting financial
information to the management, and
-Advising on taxation matters.

16. What Hotel Accountants Do?
• Producing an accurate set of month-end
accounts
• Comparing profit to previous periods and
forecasts (estimates)
• Preparing budgets and business plan
• Financial statement and balance sheet
production
• Cash flow statements
• Payroll control

17. Sounds Complicated?!
It is not.

19. Unique Things about Hotel Guest:
Charge Privilege: For convenience of guest and
hotel as well, hotels provide a facility of “buy
now, pay later”.
Unexpected Check-Outs: Guests can decide to
leave any day, any time they wish. Hotels do not
force them to honour the agreement in
reservation contract, because they want guests
to keep coming back.
Hence, hotels have to keep their guest accounts
accurate, and up-to-date, to handle sudden
departures.

20. Charge Privilege & House Limit
Hotels can not afford to give unlimited credit to
any guest because it will be too risky.
Every guest is permitted a maximum credit
purchase limit , known as House Limit.
Every account is checked and totalled every day to
find out if an account has crossed that limit.
Accounts near their House Limit, are called High
Balance Account.
Charge privilege is not allowed to Scanty baggage
and Walk-in guest.
They are on APC (All payments in Cash) basis.

21. The major Functions of Front
Office Accounting
Creation & maintenance of guest & non-
guest accounts, timely, & accurately.
Tracking financial transactions (buy &
Pay) of customers.
Monitoring the credit limit of guest.
Preparing a high balance account report.
providing an efficient Management
Information System (MIS).
Maintaining effective control over cash &
credit transaction.

22. Types Of Accounts
Guest Accounts
Non-guest accounts

23. Guest Account
 A guest account is the record of
financial transactions between a
resident guest & hotel. The front
office creates, an individual folio
(a/c) for each guest. On the basis
of guest folio, the final bill is
prepared, and presented to the
guest for payment.

25. NON-GUEST ACCOUNTS
• A non-guest account is the record
of the financial transactions, that
take place between a non-resident
guest & the hotel. This is also
known as city account.
• Non-Resident guests use services like
restaurant, bar, salon, spa, swimming
pool, club etc.

27. Transactions Guest Charges
• Guest charges (credit purchase)can include:
–Guest room charges
–Taxes
–telephone charges
–Food and beverage
–Charges for other product & services

28. Generally Accepted Accounting
Principles (G. A. A. P. s):
Standards and procedures, that have been
adopted, by those responsible for
preparing business financial statements,
for the purpose of ensuring standard,
and uniformity.

29. Accounting Terms: Basic
• Assets: Items owned by a business including
cash on hand, money in checking or other
accounts, money owed to the business,
inventories, property, equipment, and
furnishings.
• Liabilities: Debts owed by a business.
• Owner’s Equity: Assets Liabilities

30. Uniform System of Accounts for
the Lodging Industry (USALI):
• A standard set of accounting procedures,
used to record a hotel’s financial transactions
and condition.

31. Account & Folio:
• A document used to show increases or
decreases in the asset, liability, or owner’s
equity. Because of their shape, accountants
refer to these as “T” accounts.

33. Accounting Terms
• Accounts Receivable (A R): Money owed to a
hotel. E.g. from guests
• Accounts Payable (A P): Money owed by a
hotel. E.g. to suppliers, vendors & loan
account
• Retained Earnings: Profits earned, but not
paid (disbursed) to the business owners.

34. Double Entry Accounting:
• A system of recording financial transactions,
in a way, that maintains entry of one
transaction in two books; once, on credit side
and second, on debit.
• Helps in Trial Balance.

35. Accounting for Guest Charges
• Debit: An accounting transaction that records
a change on the left side of a “T” account.
• Credit: An accounting transaction that
records a change on the right side of a “T”
account.

36. Vouchers
The front desk cashier is required to present
supporting documents as a proof, for all the
financial transaction, buy or pay, recorded in
the guest folio.
Voucher is a written instrument, that serves to
confirm, or witness (vouch) for a transaction.
Commonly, a voucher is a document, that
shows goods have been bought, or services
have been given, authorizes payment, and
indicates the ledger account(s), in which these
transactions will be recorded.

38. Types Of Vouchers
Debit or Credit
Miscellaneous
Charge VoucherVisitor's Paid-out
Telephone Call
Voucher
Cash Receipt
Voucher
Travel Agent
Voucher
Commission
Voucher
Guest Allowances
Voucher
Restaurant/Bar
Check

39. Vouchers
Visitor’s Paid-Out Voucher
It is cash paid out by the hotel
on behalf of a guest. If
petty payments, like taxi
fare, cinema tickets,
medicine, postage etc. are
made by the front desk, a
Visitor's Paid Out Voucher
is issued on guest's name,
and his signature is
collected, and the amount
is debited in guest's folio.
VPO is paid from Imprest or
cash bank.
Miscellaneous Charge
Voucher
Guests’ miscellaneous charges
may include the following:
• Shoe Shine
• Health Club
• Barber Shop
• Beauty Parlour
• Pastry Shop
• Postal Charges
• Antique Shop

40. Cash Banks
• A cash bank is an amount of cash given to a
cashier, before the shift begins, in order to
tender exact change, in every transaction.
• Only one person, who signs for it, has access to
the cash bank, and is solely responsible for it.
At the end of the shift the cash bank amount is
separated, and the remaining cash is put in an
envelope, and deposited with chief cashier.

41. Cash Bank: Shortage & Overage
• Monetary differences between the money
placed in Front Office cash envelope, and
cashier’s net cash receipt, is noted on the
envelope as overages (more), shortages or
due backs.
• Net cash receipt is the amount of cash,
cheques and other negotiable instruments in
the cashier’s drawer, minus, the initial cash
bank, plus, the paid-outs.

42. Cash Bank: Due Back
Due Back occurs when a cashier pays out more
than the amount received as cash bank, and
there is not enough cash in the drawer to
restore the initial bank. (Due Backs are also
known as Due Bank).
When VPO is settled later, Due Back money is
recovered and returned.

43. Vouchers
Cash Receipt Voucher
A written document, that
is produced by a
company, each time it
receives money for
goods, or services.
Telephone Call Voucher
In automated hotels, call
from rooms are directly
billed into account.
If a call is made through
Operator, then a bill is
raised on telephone
voucher.

44. Vouchers
Travel Agent Voucher
Voucher detailing the
accommodation,
transport, food &
entertainment to be
provided to the bearer
(guest).
The payment may be
direct by guest, or sent
to the agent.
Commission Voucher
Travel agents, tour
operators, taxi drivers
etc., who provide
business to the hotel,
are paid a commission
(10% of room rate)
through this voucher

45. Vouchers
Guest Allowances
A rebate or deduction
from an invoice (bill), to
give a
compensation to the guest,
for poor service or
mistake.
Excess advance deposit
refund, at check-out, is
also an allowance.
Restaurant/Bar Check
Restaurant and bar check
will have the details of
charges of food, or
drinks, ordered by the
guest. When the check
is presented, the guest
signs for confirmation
that he had agreed to
pay.

46. Hotel IHM, Hajipur
Correction Voucher
Date:_______________
Name:________________________________
Room No:______________
Explanation:________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
Amount:__________________
Ref No:____________________
Cashier:___________________
Authorized by:_____________________

47. Folios
• The front desk cashier transfers (writes)
the financial transactions, that are
recorded in the vouchers, to individual
or the group accounts folio.
• A folio is a written record of a guest’s
accounts, & is created at the time of
reservation or registration.

48. Types OF Folios
Hotel Front Office Accounts
Guest Folio
Master Folio
Non Guest/City
Folio
Employee
Folio

49. Guest Folio
These are accounts of individual person, of
guest rooms, and are also called, bill folio.

50. Non Guest or City Folio
They are also called semi-permanent folio, and
are the account of non-guest business, or
agencies, with hotel charge purchase
privileges (buy now, pay later).

51. Master Folio
These are accounts of more than one person,
or guestrooms, and are usually maintained
for groups.

52. Employee Folio
They are the accounts of various employees
with charge purchase privilege, and not
always handled by front office. Some
accounts are directly handled by Accounts
department. For example, City folio, Credit
card payment etc.

53. Split Folio & Incidental Folio
Company sponsored guests, at times, request
for a split folio, one to record expenses to be
paid by the company, and the other, to be
paid by the guest personally and directly.
The personal expenses, like cigarette or drinks,
are recorded in Incidental Folio.

54. Example of Debit & Credit Entries
Debit
• Room rate
• Tax
• Food & Beverage
• Laundry
• Telephone
• VPO
• Health Club & Spa
• Business Centre
Credit
• Pre-Payment
• Part payment
• Allowance
• Adjustment
• Transfer
• Final settlement

55. LEDGR
A ledger is a collection of the same
type of accounts. The front office
ledger has a collection of folios.
There are normally two ledgers .
 Guest Ledger
City Ledger

58. GUEST LEDGER
A guest ledger contains the details, of all the
financial transactions, between all resident
guests & a hotel, including charge purchases
& the payment received from the guest. In a
manual system , the financial transaction are
recorded in a tabular ledger, or tab ledger,
which is of two types:
• Horizontal Tabular Ledger
• Vertical Tabular Ledger

59. Visitor’s Tabular Ledger
Visitor’s tabular ledger is a ledger, meant for
keeping the records, of all registered guests, in
a loose leaf form. (1 leaf or sheet per day)
It serves the purpose of a day book (sales book)
on one hand, and registered guest’s personal
account on the other. It is maintained for
keeping the record of all the transactions,
relating to the sale of goods and services, to
registered guests in a systematically analysed
form.

60. Vertical Tabular Ledger
Room
No.
101 102 103 104 105 106 107
Name
Pax.
GRC No.
Plan
Rate
Tea
Breakfast
Lunch
Dinner
…
Total Dr.
Total Cr.

61. Horizontal Tabular Ledger
Day_________________ Date________________
Room
No.
Name Pax. Rate BF Lunch …………
..
Credit
Total
301
302
303
304
305
306
307
308
309

62. City Ledger
• A city ledger contains the collective
accounts of all non-resident
individuals & agencies, to whom
hotel extends charge privilege
(credit purchase facility).
• It is also known as Non-guest ledger.

63. List of City Ledger Accounts
• City Folio
• Bill-to-Company
• Disputed
• Late Charges
• Guaranteed Reservation Retention Charge
• Travel Agent Voucher
• Airline’s Meals & Accommodation Order &
Passenger Service Order
• Credit Card
• Skipper
• Walk-Out (left unintentionally)
• Bad or bounced Cheque

64. Accounting Cycle
3. Settlement of Account
Immediate Payment Deferred Payment
2. Maintenance of Account
Posting Charges Night Audit
1. Creation of Account
At Reservation At Check-In

65. Settlement of Account
• Also known as “Zero Out”, it is the final step in
guest accounting cycle. One last entry is made,
either on debit side, or credit side, depending on
the outstanding account balance.
• The balance of the account is calculated with the
following formula;
• Opening balance plus, debit entries, minus credit
entries = Outstanding balance. If debit side is
more, guest pays. If credit is more, the hotel
refunds to the guest.

66. Trial Balance
Accounting: The aggregate of all debit and
credit balances at the end of an
accounting period that;
(1) shows if the general ledger is in balance
(total debits equal total credits), before
making closing entries,
(2) serves as a worksheet, for making
closing entries, and
(3) provides the basis for making draft
financial statements. (Income or loss)

67. Aging Schedule or, Account Aging
• Aging schedule is a table, that shows a
summarized breakup of accounts receivable, into
different time brackets. It is an important tool,
used in working capital management, to project
pattern of collections, and estimate doubtful
debts.
• It is called aging schedule because it ranks
accounts receivable, according to their age i.e.
into slabs such as not yet due, 30 days overdue,
60 days overdue, 90 days overdue, etc.
• As an account gets older, the possibility of
collecting payment becomes more doubtful.

68. Compilation & Presentation
Praveen Jha
Senior Faculty
IHM Hajipur
Vaishali, Bihar