GUEST ACCOUNTING
Contents
 Accounting Basics
 Guest Accounting
 Accounting Entries
 Accounting Documentation
 Guest Accounting and the Front
Desk
Accounting Basics
 The accounting equation is the most basic of all
the accounting principles for the dissemination
of information. It states that:
Assets = Liabilities + Owner’s Equity
 An asset is an economic resource
 A liability is an economic obligation
 Owner’s equity is the level of ownership the owner
has in the operation
Accounting Basics (Cont….)
 The accounting equation must always be in
balance, the two sides of the equal (=) sign
must themselves be equal
 This equation can show at a glance the
financial state of any business, however does
not show great detail
 Because of the limited detail, the accounting
equation is used more often to illustrate details
of smaller business entities
Accounting Basics (Cont….)
 Owner-operated hotels would use the
accounting equation most often
 An example of the accounting equation used in
a small owner-operated hotel:
Wilson Family Inn
$450,000 - $313,500 = $136,500
(assets) – (liabilities) = owner’s equity
 Here, the Wilson family can claim ownership
(or equity) in this operation of $136,500
Accounting Basics (Cont….)
 For more financial detail, lenders, investors,
shareholders and others look into a hotel’s
balance sheet
 The balance sheet serves to summarize a
hotel’s financial situation on a given date, and
serves as a financial “snapshot” of the current
state of assets, liabilities and equity
 Continuing our example, the Wilson family’s
balance sheet for their hotel could look like
this:
Accounting Basics (Cont….)
Wilson Family Inn
Balance Sheet - Dec 31, 2010
Assets
Cash
Liabilities
$35,000
Accounts payable
$12,000
Cleaning supplies
$2,500
Salaries payable
$4,500
Linen
$1,100
Taxes payable
$2,000
FF&E
$250,000
Notes payable
$295,00
Land
$55,000
Total Liabilities
$106,000
Owners Equity
Building
Office Supplies
Total Assets
$400
$450,000
Wilson, capital
Total equity and
liability
$313,500
$136,500
$450,000
Guest Accounting
 Most hotels use traditional accounting concepts
to organise and track guest information and
other data
 Tracking of financial transactions within the
front office is called guest accounting
 The term “ledger” is used to identify what
information is contained in a certain revenue
tracking vehicle
 The vehicles used to track the revenues and
charges within the front office are the guest
ledger and the city ledger
Guest Accounting (Cont…)
 Each of these ledgers serves as an accounting
vehicle for a hotel to track who it owes money
to and who owes it money
 The two primary accounting entries used to
track these charges and credits are the debit
and credit
 The debit has a positive affect on the total
balance of a guest account and the credit has a
negative effect
 Front office employees deal with these credits
and debits on a daily basis
Guest Ledger
 The guest ledger is an all encompassing term
used to track hotel transactions primarily
before and during a guest’s or group’s stay
 The guest ledger is also used to track the daily
transactions of each revenue-generating side
of the hotel triangle (room, catering, and
outlet/ancillary sales)
 Hotels will create an account within the guest
ledger to track the inflow and outflow of
revenue
Guest Ledger (Cont…)
 The types of accounts may vary in name from
hotel to hotel but the functions of each are
generally consistent, the most frequently used
types are
 House Account – serves as a perpetual
account to track recurring transactions that
occur within the hotel
 Guest Account – each individual guest
account will track debits and credits incurred
prior to and during the stay
Guest Ledger (Cont…)
 Master Account – closely mirrors the
individual guest account, the main difference is
that a master account encompasses
registration/accounting for an entire group, not
individual attendees.
 Individual guest and group charges related to a
specific group based on billing arrangements
are routed to the master account as applicable
 Routing is the process where credits/debits
incurred by one account are manually or
automatically transferred to another account
City Ledger
 The city ledger is used to track revenues due
to the hotel, these revenues are called
receivables
 The employee(s) of the Accounts Receivables
area of the accounting department will manage
the city ledger by creating a city ledger
account in the accounting menu of the PMS for
each guest ledger account that checks out with
a balance due to the hotel
City Ledger (Cont…)
 The guest ledger must be cleared of noncurrent
accounts to make way for new arrivals
 A noncurrent account is measured by its
departure date, which is directly tied to the
creation of guest history accounts
 If there is a balance outstanding on an “aged”
account, a city ledger is created to track those
revenues
 Hotels depend on revenue to cover their costs
so within the city ledger an “aging statement”
will track how long reach receivable has
remained uncollected
Accounting Entries
 The process of updating the accounting menu
is achieved through a series of entries
 Hotel accounting entries serve specific
purposes to accurately document each
transaction
 The front office accounting formula
summarises how these entries are tallied up:
Beginning Balance + Charges – Credits = Ending Balance
Guest Accounting and the Front
Desk
 Front desk employees may handle cash
throughout their day – guests may choose to
pay with cash even though they put down a
credit card number at check in
 Most hotels allow their guests to cash personal
cheque of a certain amount, and often
exchange foreign currency as well
 Front desk agents must be able to handle
these transactions so each has their own
“individual bank”
Guest Accounting and the Front
Desk (Cont…)
 Each bank is audited by the general cashier
to ensure that proper accounting procedures
are adhered to and to avoid fraud
 Banks are counted prior to each shift to ensure
that the minimum reserve is there and at the
end of each shift, a “cash out” process is
undertaken to match all transactions with what
is now in each individual bank
 Front desk employees “drop” their excess cash
to the general cashier, who then replenishes
individual banks if needed
Shift Closing
 Each desk agent will run an report from the
PMS called an employee shift closing report
 Each employee is assigned an identification
number within the PMS to track his/her
transactions
 When each agent on a shift has completed his
or her own employee shift report, the manager
may conduct an entire shift closing which will
summarise all the transactions completed by
each shift member