1. GUEST ACCOUNTING

2. Contents Accounting Basics Guest Accounting Accounting Entries
Accounting Documentation
Guest Accounting and the Front Desk

3. Accounting Basics
The accounting equation is the most basic of all the accounting principles for the dissemination of information. It states that:
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
Assets = Liabilities + Owner’s Equity

4. 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

5. 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:
Here, the Wilson family can claim ownership (or equity) in this operation of $136,500
Wilson Family Inn
$450,000 - $313,500 = $136,500
(assets) – (liabilities) = owner’s equity

6. 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:

7. Accounting Basics (Cont….)
Wilson Family Inn
Balance Sheet - Dec 31, 2010
Assets
Liabilities
Cash
$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
$313,500
Building
$106,000
Owners Equity
Office Supplies
$400
Wilson, capital
$136,500
Total Assets
$450,000
Total equity and liability

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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”

17. 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

18. 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