Paper: 07, Front Office Operation and Management

Module: 15 Front Office Accounting: Basics of Hotel Accounting

Principal Investigator Prof. S. P. Bansal

Vice chancellor
Indira Gandhi University, Meerpur, Rewari, Haryana

Co-Principal Investigator Dr. Prashant K. Gautam

Director, UIHMT
Panjab University, Chandigarh

Dr. Ankush Ambardar

Paper Coordinator Assistant Professor
Department of Tourism & Hotel Management
Kurukshetra University, Kurukshetra

Dr. Ankush Ambardar

Content Writer Assistant Professor,
Department of Tourism & Hotel Management
Kurukshetra University, Kurukshetra
Tel

Prof. Manjula Chaudhary

Content Reviewer Professor
Department of Tourism & Hotel Management
Kurukshetra University, Kurukshetra

Tourism & Front Office Operations and Management

Hospitality Front Office Accounting: Basics of Hotel Accounting
 Items Description of Module

Subject Name Tourism and Hospitality

Paper Name Front Office Operations and Management

Module Title Front Office Accounting: Basics of Hotel Accounting

Module Id Module no-15

Pre- Requisites Knowledge of Basic Hotel Accounting

Objectives To study the accounting system at hotel front office

Keywords Posting, transaction, folio, allowance

QUADRANT-I
Module 15: FRONT OFFICE ACCOUNTING: BASICS OF HOTEL ACCOUNTING
1. LEARNING OUTCOME
2. INTRODUCTION
3. FRONT OFFICE ACCOUNTING
3.1 Accounts
3.2 Folios
3.3 Vouchers
3.4 Point of Sales
3.5 Ledgers
3.6 Accounting System
3.7 Visitors Tabular Ledger
3.8 Guest Weekly Bill
4. SUMMARY

1. LEARNING OUTCOME
After completing this module students will be able to:
i. Understand the concept of front office accounting.
ii. Know various types of accounts, folios, vouchers, ledgers maintained by hotel front office.
iii. Know the various accounting systems.
iv. Understand important forms and formats used in accounting.

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Hospitality Front Office Accounting: Basics of Hotel Accounting
 2. INTRODUCTION:
A front office accounting system is a set of procedures used to prepare, maintain, monitors, record the
transactions of guests and groups, and other non-guests using the hotel facilities and services. The front
office ability to collect outstanding balances depends upon the usage and performance of the
accounting system followed by hotels. An effective accounting system consists of performed during
various stages of guest cycle. At the pre-arrival stage a guest accounting system gathers data related to
reservation guarantee and any advance deposits. At the time of guest arrival, the accounting system
looks for room rates assigned and the taxes/discounts applicable at the registration. During the
occupancy stage the transactions of the guest are tracked and posted to the folios. Lastly, at the
departure stage, guest accounting system ensures payment for facilities and services availed by the
guest.
Moreover the financial transaction of city guests/non-guests accounts may also be processed as per the
parameters of front office accounting. It helps in promoting local business. The non-guest accounts
also include accounts of former guests who did not settle their respective bills. Whereas the
responsibility of collecting non-guest accounts shifts from front office cashier to accounting division.
A front office system generally
 Creates and maintains an accounting record for each guest and non-guest account.
 Track and record financial transaction throughout the guest cycle.
 Ensuring control over cash and non-cash transactions.

3. FRONT OFFICE ACCOUNTING:

3.1 Accounts:
An account is a system of accumulating and summarizing financial data on a form or a sheet of
computerized system. It contains and stores the various business transactions held during various
stages of guest stay in the hotel. Front of accounts are recordkeeping devices to store information about
guest and non-guest financial transactions. An account in written form resembles letter ‘T’ and is
called a T-account.

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Hospitality Front Office Accounting: Basics of Hotel Accounting
 Charges (Debit) Payments (Credit)

In present times the growing use of automation in front office has diminished use of T-accounts. On
the left hand side of the T, charges are posted which show increase in the account balance and the
payments are posted on right hand side denoting decrease in the account balance. The account balance
is calculated by subtracting right side total from the left side total of the T-account. Front office
documents typical journal form. In non-automated or semi-automated recordkeeping system, a journal
contains following information:
Description Charges (Debit) Payments (Credit) Balances

In fully automated system, charges and payments may be listed in a single column. The minus and plus
signs will indicate the decrease or increase in the account.
Front office has to maintain and take care of two types of accounts:
 Guest Account: It is the record of financial transactions between hotel and in-house guest.
Such accounts are created at the time of guest guaranteed reservation or at the registration of
the guest in the hotel. During the stay the front office looks for any transactions held by guests
and posts the same in guest folio. The payments of the accounts is generally taken at the check-
out stage of the guest, but in some cases a guest may be requested to make partial or full
payment during any time of guest cycle. It may be seen when a guest crosses house limit set by
the hotel for every individual guest.
 Non-guest Account: In order to promote local business and corporates business, hotel might
extend charge privilege to such guests, groups and for them non-guest accounts may be created.
Non-guest account may be formed even for those guests who do not settle their account
completely, hence changing their status from guest to non-guest. The non-guest accounts are
generally billed monthly by the hotel accounting section.

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Hospitality Front Office Accounting: Basics of Hotel Accounting
 3.2 Folios:
A folio is a statement of all transactions affecting the balance of each individual account. It list the
debits and credits of your charges. For example, room charges, phone calls, minibar, laundry services,
room service, valet, florist shop, spa, etc.
The invoice in hotel is no different than an invoice for any other good or service - it is simply proof of
how much a guest have paid. It is generally opened at the time of reservation or once the guest registers
with the hotel at check-in. At settlement the guest folio is to be returned to zero balance by any mode
of payment. The process of recording transactions on folio are termed as posting.

Types of Folio:
 Guest Folio: It is an account assigned to a single hotel guest. All transactions between the hotel
and the guest are recorded into the guest folio.

Source: [Link]

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Hospitality Front Office Accounting: Basics of Hotel Accounting
  Master Folio: It is an account assigned to more than one guest or guestrooms usually for groups
(travel agents or company).

Source: [Link]
hotel

 Non-guest or Semi-Folio: It is a hotel folio that contains records of a walk-in guests or non-
guest business or agencies with charge privilege. Non-guest also include persons utilising
facilities like spa, health club, pool, etc.
 Employee Folio: It is an account assigned to hotel employee with charge privileges, all
transactions between the hotel and the employee are being saved into this folio.

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Hospitality Front Office Accounting: Basics of Hotel Accounting
 Types of Posting:
There are two types of transactions that are posted to the guest account. They are debit and credit
entries most importantly. The debit items include: room charges, restaurant, coffee shop, bar charges,
telephone charges, laundry used for hotel facilities e.g. Health clubs, business centre and
transportation.
Credit entries include: pre-payments, payment for part of the bill during stay, payment for final
statement amendments to the bill.

3.3 Voucher:
These are documents that have details of transactions made by guests from various point of sales in
hotels like, room service, restaurant, etc. The voucher is sent to front office for posting in the guest’s
folio and record keeping. Vouchers acts as a supporting document of the transaction happened between
the hotel and the guest. A voucher also acts as a proof that a transaction has taken place in the hotel.
Charge vouchers, Correction vouchers, Allowance vouchers, Transfer vouchers and Paid Out vouchers
are examples of vouchers. Most automated systems require only few vouchers, as the terminals
interfaced with property management system are capable of electronically transmitting transaction
information directly to electronic folios.

a) Charge vouchers: The guest receives goods and services from the hotel but does not pay for
them immediately known as deferred payment transaction. Where ever the transaction occurs,
same has to be communicated to front office for posting in folio and the same is recorded on a
charge voucher duly signed by the guest. The charge voucher is also called as account
receivable voucher.

b) Correction vouchers: If an error is found in a guest folio, an account correction transaction

corrects the same. It has to be carefully done on the same date of the business day. An account
correction can either increase or decrease an account balance. E.g. If a charge is wrongly posted

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Hospitality Front Office Accounting: Basics of Hotel Accounting
 as higher than the actual rate, it can be corrected on the same day after entering the details of
correction in a correction voucher.
c) Allowance vouchers: Allowance vouchers require management approval. They are generally
of two types. One type of allowance is a compensation given to a guest for poor services or
dissatisfaction related to goods or services etc. The other type of allowance is a correction to a
posting error on an existing account after the close of business. The allowances given must be
documented with the use of an allowance voucher.

ALLOWANCE VOUCHER

NO._____________

DATED__________

NAME_____________________ ROOM
A/C NO._______

DETAILED AMOUNT
EXPLANATION

RS. RS.

RUPEES IN WORDS

TOTAL RS.

Source: [Link]
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 d) Transfer vouchers: A transfer voucher is used when the account balance or account entry is
transferred or shifted from one folio to another folio. An account transfer may also occur when
a guest checks out by paying through credit mode. The guest’s outstanding account balance is
transferred from a guest account to a non-guest account through the use of a transfer voucher.

e) Paid Out vouchers (Visitor’s Paid Out): A guest may sometimes request services which are
not available in hotels. In such cases the hotel will arrange those services from outside
organisations. The staff will arrange and pay for these services and notify reception or cashier
of the charges to be added to the guest folio. It is cash paid out by the hotel on behalf of the
guest. Petty payments like taxi fare, cinema tickets, purchase from outside hotel, 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.

HOTEL XYZ

PAID OUT VOUCHER

DATE_____________ TIME________________

Guests Name_______________________________________________

Room no._______________ Account Folio No._________________

Detailed explanation__________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

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Hospitality Front Office Accounting: Basics of Hotel Accounting
 Rs. ___________ (In words________________)

Prepared by________________

Authorised by______________

Audited by_________________

Signature of the guest____________

Source: [Link]
3.4 Point of sales:
The term point of sale denotes the location at which guest purchases goods or services in hotel
property. Any section of a hotel collecting revenue for its goods and service is considered as point of
sale. The responsibility of front office is to ensure that all charge purchases at these points are posted to
proper guest folios. Guest operated devices like mini bar, in-room vending are even considered as point
of sale and the transaction held is posted in folio and in case of fully automated system the charges get
directly posted to the individual folio of the guest. The automated system helps in reducing the time
and may be more accurate to post the services with minimum errors. The hotel offers various goods
and services at different locations in the hotel and require proper posting and documentation of sales
transactions. Point of sale must provide some basic information when posting a charge through a
remote terminal or submitting a voucher or transaction number, the amount charged, room number,
name of point of sale (like room service, health club, etc), description of charge (like beer, message,
etc), the signature of the guest and the employees identity submitting the charge. Posting through an
automated terminal only requires a guest signature on a voucher or sales slip in case of any dispute
regarding the transaction posted.

3.5 Ledgers:

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 A Ledger is a book in which the account summary of both resident and non-resident guests are entered.
The front office ledger is a collection of front office account folios. They are the part of accounts
receivable ledger. An account receivable ledger represents money owed to the hotel. Moreover, this
ledger aids in preparing the Profit and Loss account and Balance Sheet of a hotel. Front office
accounting system separates accounts receivable ledger in two groups. The guest ledger and the non-
guest ledger.

 Guest ledger: Guest Ledger is a type of ledger that has the accounts of all the guests staying in
a hotel or guests who have sent advance deposit. All financial transactions made by a guest are
recorded onto guest folio opened at the time of registration to assist tracking guest account
balances. This ledger is also known as Transient or Room Ledger. Guests who make
appropriate credit arrangements at registration may be extended privileges to charge purchases
to their individual account folios. Guests may also pay against their outstanding balance at any
time during occupancy. Guest’s financial transactions are recorded in guest ledger accounts to
track guest account balances. Some of the accounts of the resident guests may be settled by
their company, travel agency or Airline Company.

 City Ledger: The City ledger is also known as the Non-guest ledger and it is the collection of
non-guest accounts. If a guest account is not settled by the guest in full at checkout, the guest’s
folio balance is transferred from the guest ledger to the city ledger in the accounting division
for collection post departure of the guest. City Ledger could also include accounts held by local
business people using hotel facilities and services for entertainment or business meetings.
Guests who walk out of the hotel without settling the outstanding balance. Guests who have
sent prepayments to guarantee their bookings, but have not arrived or checked in. Even a
skipper’s outstanding balance is transferred to city ledger with a hope that the amount may
come through.

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 3.6 Accounting System:
The formats of guest and non-guest account folios may be different, depending upon the front office
recordkeeping system. The process of guest accounting is operated either:-
 Manually i.e., non-automated: In this operating mode all the phases
involved in accounting process are carried out by the staff. Guest folios in a manual system
contain a series of columns for listing individual debit and credit entries accumulated during
occupancy. At the end of the business day, each column is totalled and the ending balance is
carried forward as the opening folio balance of the following day. The entire system is prone to
omission and computation errors. Another drawback is handling and re-handling of numbers
data. This type of system is useful for small hotels only where the workload is not much.
 Mechanically i.e., semi-automated: This system is used by hotels
which are medium-sized or large but yet don’t have automatic machines like computers.
Usually they use a combination of office machines, clerical equipment and manpower to
operate these systems. Guest transactions are printed sequentially on a machine-posted folio.
The information recorded for each transaction includes the date, department or reference
number, amount of the transaction, and new balance of the account. The folios outstanding
balance is the amount the guest owes to the hotel or the amount the hotel owes the guest in the
event of credit balance at settlement. If the posting is done by mechanical equipment, it does
not retain individual folio balances. This means that each accounts previous balance must be re-
entered each time an account posting is made to the folio.
 Through Computer i.e., fully automated: This system comprises of
computers and other electronic devices located at every point of sale and interfaced with the
main cashier at the front desk. All task done manually is easily done by automatic machines
whether it’s posting, auditing, correction of errors, etc. The machines are fast and practically no
possibility of late charges. Necessary steps such as sorting, of vouchers, identification, posting
code and reference code, posting are automatically carried out. Since computers are machines
operated by humans, it is obvious that the accuracy will depend upon the software developed
and the efficiency of the staff operating.

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 3.7 Visitor Tabular Ledger (VTL):
Visitor tabular ledger is in a loose sheet/form. One VTL is prepared for all the guests for one day that
means all guests names, room numbers, etc. staying in the hotel are entered in one visitor tabular
ledger. In case all the names cannot be entered in one visitor tabular ledger then one more sheet can be
added for the same day. From visitor tabular ledger, hotel can know the total room sale, food sale,
breakfast sale, etc. for one day. The total sale shown by the VTL is the total daily sale of the hotel. At
the end of the day the VTL is sent to accounts department. Account department then finds out weekly,
monthly, quarterly, yearly sale. This sale can be compared with the last year’s sale or with the
budgeted sale. VTL has also debit side and credit side. Instead of having left side as debit and right
side as credit the VTL’s upper portion is debit side and the lower part is credit side. All the debit
vouchers are posted in the debit side of the visitor tabular ledger in the respective columns. The credit
vouchers are entered on the credit side of the ledger. All allowances, discounts, cash deposit, credit
balance carried forward are entered in the credit side of the visitor tabular ledger. Discount and
allowance offered must be duly authorized otherwise cashier will be responsible to pay.

VISITORS TABULAR LEDGER

ROOM NO. 101 102 103 201 202 203 301 302 TOTAL

NAME

NATIONALITY

TYPE OF
ROOM

NUMBER OF
PAX

G.R. NO.

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 DATE/TIME
OF ARRIVAL

DATE/TIME
OF
DEPARTURE

PLAN

ROOM RS. RS. RS. RS. RS. RS. RS. RS. RS. P.
P. P. P. P. P. P. P. P.

BREAKFAST

LUNCH

DINNER

SNACKS

LAUNDRY

TELEPHONES

V.P.O.

FLOWRIEST

DAILY TOTAL

BALANCE
DR

CR

G. TOTAL

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 DR

CR

ALLOWANCES

LEDGER

TRANSFER

BALANCE

3.8 Guest Weekly Bill:

Guest weekly bill is prepared for each guest and is presented on checkout for settlement. It is called a
weekly bill as for one week one bill is prepared. There is no hard and fast rule that a bill has to be
prepared for one week. In case majority of guests in a hotel stay for three days then one may adopt a
three day bill. If a guest stays beyond three days then another bill is attached. The guest weekly bill is
opened immediately on check in by receptionist. The copy of the guest registration card is stapled with
the weekly bill/folio. The cashier can refer to guest’s signature on guest registration card and compare
his/her signature with the voucher. If signature tallies then the cashier debits the voucher to guest’s
account otherwise he/she sends the bill back to the outlet with a remark that signature does not tally.
All the weekly bills are placed numerically in the vertical file and it helps in taking out a particular bill
instantly. The vouchers after posting in the guest weekly bill should be kept in the bills rack.

GUEST WEEKLY BILL

HOTEL XYZ
T. NO. SERIAL NO. 4546454
E. MAIL
ROOM NUMBER………………………
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 NAME OF THE GUEST MR./MS. ………………………………………….
NATIONALITY………………………………………………
DESIGNATION……………………………………………….
OFFICE ADDRESS…………………………………… E. MAIL ………….. T. NO. …………..
PERMANENT ADDRESS……………………………. E. MAIL …………… T .NO. …………
DATE AND TIME OF ARRIVAL…………………. DATE AND TIME OF DEPARTURE……
TYPE OF ROOM…………………………….. NUMBER OF PAX……………………………
RATE……………….. ROOM…………………….. PLAN……………………….
BILLING INSTRUCTIONS…………………………….
CREDIT CARD…………………………. CARD NUMBER…………………………….
DATE OF EXPIRY………………………
BOOKED BY…………………………….

DATE

DAY

ROOM RS. RS. RS. RS. RS. RS. RS. RS. RS. P.
P. P. P. P. P. P. P. P.

BREAKFAST

LUNCH

DINNER

SNACKS

LAUNDRY

TELEPHONES

V.P.O.

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 FLOWRIEST

DAILY TOTAL

BALANCE
DR

CR

G. TOTAL

DR

CR

ALLOWANCES

LEDGER

TRANSFER

BALANCE

4. SUMMARY:
During the stay, guest is offered various facilities and services like room, food, beverage, health club,
telephone, etc. For each of these services the payment is expected either at the time of service rendered
or on or after the departure time. In order to present the final bill, with all vouchers duly debited, a
proper record of all the vouchers is recorded in the guests’ folio and in guest ledgers. The front office
ability to collect outstanding balances depends upon the usage and performance of the accounting
system followed by hotels. An effective accounting system consists of performed during various stages
of guest cycle. At the pre-arrival stage a guest accounting system gathers data related to reservation
guarantee and any advance deposits. At the time of guest arrival, the accounting system looks for room
rates assigned and the taxes/discounts applicable at the registration. During the occupancy stage the
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 transactions of the guest are tracked and posted to the folios. Lastly, at the departure stage, guest
accounting system ensures payment for facilities and services availed by the guest.

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