INSTITUTE OF HOTEL MANAGEMENT, CATERING & NUTRITION, PUSA. NEW DELHI.

FRONT OFFICE (ACCOUNTING)

Definition of Accounting: - Accounting is the systematic process of recording, reporting,

summarizing and analyzing financial transaction of any business. In F.O. accounting it is
alsoknown as cashiering.

Front office accounting or Cashiering plays a most important role: -

1. At the pre arrival stage of the guest, the accounting system collects information on
advance payment and billing instruction for the future guests.
2. On check-in, it documents the room rates and taxes applicable.
3. During the guest’s stay, it tracks various purchase made by the guests at various outlets.
4. At the time of check-out, it ensures payments for various services Availed by the guests.

The main function of the front office cashier is:

A. Create and maintains records of guest and non-guest account.
B. Ensures control over various g4uest and non-guest accounts and transactions.
C. Monitoring the credit limit of guests and asking for a deposit from guests in case
of high outstanding balance
D. Records settlement for all goods and services provided.

Accounting report maintained in the hotel are :-

1. Profit and loss statement. (Income settlement)

2. Balance sheet.
3. Statement of changes in financial position.

Accounting fundamentals

1. Account
2. Voucher
3. Folio
4. ledger

Account:
An account is a record of money received and money paid out. Financial records of an
organisation that registers all financial transactions and summarises it. It is written in the form of
‘T’, ‘debit’ &‘T’ ‘credit’ format are used to denote right side and left side.
Types of account:
a. Guest account b. Non-guest account

Guest account:
It is a record of financial transaction which occurs between a Guest and the hotel. It is credited at
the time of guest registration or when against guarantees a reservation. During the guests’ stay in
the hotel, front office records all transactions affecting the balance of a guest account. Guest
accounting means keeping an accurate and up to minute account of all that is to be received or
paid to the guest at anytime.
Opening balance + charges - credits = net outstanding

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 INSTITUTE OF HOTEL MANAGEMENT, CATERING & NUTRITION, PUSA. NEW DELHI.

Non guest account

Hotel may extend in house charge privileges to local business or agencies for promotion or to
groups sponsoring meetings at the hotel. The front office creates non guest accounts to track all
these transactions. They are also called house accounts or city accounts. They are also created
when a guest fails to settle the account at the time of departure. Also called as City Ledger

Vouchers

A voucher is a detail of transaction that has to be posted onto the folio. They are created at the
source of transactions, e.g. at the restaurant, gift shop, laundry, fitness centre, etc. various bills
that are created at different point of sale are called vouchers at front office. Some vouchers which
are created at different point of sale are called vouchers at front office. Some vouchers which are
used in front office accounting are cash voucher, charge voucher, transfer voucher, allowance
vouchers, correction vouchers and paid out vouchers.

TYPES OF VOUCHERS

1. Visitors paid out - The money paid by the hotel on behalf of the guests is known as visitor paid
out (VPO). A VPO is generally made for the following charges:
• Payment for taxi, travel agency services
• Porter charges
• Florist charges
• Postage and courier charges
• Emergency medical expenses
The paid outs are made from the cash bank that is maintained by the front office cashier. A proper
authorization should be taken from the lobby manager before making the VPO. To make a paid
out, one should
• Confirm the name, room no. and identity of the guest
• Fill the paid out voucher properly, mentioning the details of services paid for
• Get the VPO authorised by the lobby manager
• Make the payment
• Take the signature of the guest on the VPO, one the services are paid
• Post the entry in the guest folio and place the voucher in the folio docket

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 INSTITUTE OF HOTEL MANAGEMENT, CATERING & NUTRITION, PUSA. NEW DELHI.

Hotel ABC
Date:……………………..
Visitors Paid-out Voucher
Room No:………………..
Name of guest: Room Account No.:

Explanation Change

Rs Paisa

Rupees (in words) Total:

Signature of Recipient Approved by Signature of Cashier

2. Miscellaneous charge voucher - a miscellaneous charge voucher is prepared for the payment
of miscellaneous services and facilities, like laundry, health club, fitness centre, beauty salon etc.
The guest verifies and signs the miscellaneous charge vouchers which is send to the front desk
cashier for posting the charge into the guest folio.

Hotel ABC
Date:……………………..
Miscellaneous Charge Voucher
Room No:………………..
Name of guest: Room Account No.:

Explanation Change

Rs Paisa

Rupees (in words) Total:

Prepared by Approved by Checked by

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 INSTITUTE OF HOTEL MANAGEMENT, CATERING & NUTRITION, PUSA. NEW DELHI.

3. Cash receipt voucher - A receipt is an acknowledgement that a payment has been made. A
cash receipt voucher is prepared and issued to the person depositing cash as a proof of remittance
of the deposited cash.

Hotel ABC
S.No:……………………..
Cash Receipt Voucher
Date:……………………..
Received from: ………………………………………………………………………………………………………………………………………………….

Address: …………………………………………………………………………………………………………………………………………..................

………………………………………………………………………………………………………………………………………………………………………….

Amount in figure: …………………………………………………………………………………………………………………………………………….

Amount in words: ……………………………………………………………………………………………………………………………………………

On account of ………………………………………………………………………………………………………………………………………………….

Signature of Cashier

4. Telephone call voucher - Now a days a lot of hotels use computerised systems, where,
whenever a guest makes a call, the call accounting module automatically transfers the call charges
to the guest folio. In small hotels, where outgoing calls are routed through the operator, the
responsibility of billing the call charges lies with the telephone operator, who puts down the call
details on a telephone charge voucher and sends it to the front desk cashier for posting into the
guest account.

Hotel ABC
Date:……………………..
Telephone Call Voucher
Room No:………………..
Name of guest: Room Account No.:

Explanation Change

Rs Paisa

Rupees (in words) Total:

Signature of Telephone Operator

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 INSTITUTE OF HOTEL MANAGEMENT, CATERING & NUTRITION, PUSA. NEW DELHI.

5. Travel agent voucher - when the tour operators and travel agencies receive advance payment
from their clients for making travel arrangements like accommodation, food and beverages and
other services, then the travel agency makes the reservation in a hotel on the behalf of the guest. It
sends a voucher known as travel agent voucher, containing the details of the billing procedure and
services to the provided to the guest.
Airlines that have contacts with hotels also send meals and accommodation order (MAO) or
passenger service order (PSO) for layover passengers due to delay or cancellation of flights. In
such cases, the hotel obtains payment from the travel agency or airline.

6. Commission voucher - Hotels offers commissions to people who provide regular business to
them. Whenever a commission is paid by the cashier, a commission voucher is made. The
commission voucher should be authorized by a competent authority of the hotel. Generally, it is
authorized by the lobby manager. More commonly, commission vouchers are made for the
following:
• A taxi driver who brings a walk-in guest to the hotel. In case the guest stays at the hotel,
the hotel pays a commission to the taxi driver.
• A travel agent/tour operator working on commission basis (generally the commission
is10% on the room rates excluded taxes).
• Any agency working on a commission basis.

7. Guest allowance - An allowance is an amount deducted from an invoice to compensate for a

wrong posting or mistake. The guest allowance is the cash paid to the guest by the hotel,
especially in the following circumstances:
• If there is a wrong posting of a charge in the guest folio balanced due to the wrong posting.
• If a guest has deposited a large sum as advance and the amount exceeds the hotel bill.
• If an airline of a tour operator sends a crew or a group and guarantees the reimbursement
of their bills.
Guest allowances are strictly controlled. The front desk cashier requires an authorisation from a
competent authority before making such a payment.

8. Restaurant/ Bar check - Resident guests may enjoy their meals in any of the food and
beverage outlets in the outer. Whenever a guest consumes food or beverage in a restaurant, a bill
israised, in case a resident guest wishes to utilize the credit facility offered by the hotel, he should
sign the bill. The signed bills serve as a proof of financial transaction at the food and the beverage
outlets are treated as vouchers for posting the charges to the guest folio.

Folios
Front office transactions are recorded on the account statements which are called folios. A folio is
a statement of all transactions (debit and credit) of a single accounting head, which when created
starts at zero and at the time of guest departure the balance should be return to zero through
various methods of payment. The recording of transaction onto the folio is called posting. There
are four different types of folios:
• Guest folio: These are accounts of individuals’ person of guest rooms and also called bill
folio. Generally, a folio is created at the time of
• Master folio: These are accounts of more than one person or guest rooms and are usually
maintained for groups.
• Non-guest folio: they are also called semi-permanent folio and are the account of non-
guest business or Agencies with Hotel charge purchase privileges.

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• Employee folio: They are accounts of various Employees with charge purchase privilege,
and not always handled by front office.
Additional folios are also at times created by front office on special request of guests. 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. in that case a folio is opened for the posting of
room charges and Taxes and all such charges to borne by the sponsoring company, called
ROOM FOLIO OR A-FOLIO. Another folio is opened for other charges like food, beverages,
telephone, laundry etc. to be paid by the guest, called INCIDENTAL FOLIO OR B-FOLIO.
A new window is opened, where all the incidental charges are displayed, within the guest folio.

Ledgers
A ledger is a summary grouping of accounts. Front office ledger is a collection of front office
account folios. These are part of accounts receivable ledger. The account receivable ledger is
subdivided into guest ledger (for guest receivable) and city ledger (for non-guest receivable).

• Guest ledger: It refers to the set of guest accounts of the registered hotel guests who have
made advance payments. Guest’s financial transactions are recorded onto guest ledger
accounts to assist in tracking guest account balance. Guest ledger is also called transient
ledger, front office ledger or room ledger.
Guest ledger has two Types -
• Horizontal tabular ledger(HTL):- In a horizontal tabular ledger, all the credit expenses
of the guest are recorded in one horizontal row, and at the end of the row, the guests credit
or debit balance is shown. The row of the table contains the room numbers.

• Vertical/visitors tabular ledger(VTL):- These ledgers are in loose ruled forms. It is

called the visitors tabular ledger because it is made for all hotel visitors and it is called
tabular because it is prepared in analytical/tabular/columnar form. This is also called Day
book. it is called day book because all transactions which take place during the day in a
hotel are recorded in this ledger. In case the numbers of rooms occupied are more than the
columns of the ledger then more pages can be added for the same day. Visitors’ tabular
ledger has debit side and credit side normally accounting system left side is debit and the
right side is credit side. But, in case of visitors tabular ledger the upper side is called debit
side and the lower side is credit.

Non Guest / City ledger: - It is a collection of non guest accounts. If a guest account is not
settled at the time of checkout, the guests’ folio balance is transferred from guests ledger or city
ledger for following up and collection later. At the time of this accounts transfer, the responsibility
for collection is transferred to the accounting division. It contains credit card payment account,
direct billing account and accounts of past guests due for collection.

Ledgers are basically classified into -

1. Personal ledger: This ledger is used in hotels for recording the personal accounts of
guests or debtors and creditors.
Ledger of debtors: Accounts of debtors are recorded.
• Visitors tabular ledger
• City ledger
• Ledger of creditors

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 INSTITUTE OF HOTEL MANAGEMENT, CATERING & NUTRITION, PUSA. NEW DELHI.

2. Impersonal ledger: Maintained for recording the impersonal accounts (revenue, expenses,
assets, liabilities, etc.)
• Trade ledger: For accounts which have direct relation to trade ( sales, purchase, expenses
etc.)
• General ledger: Accounts of assets and liabilities are maintained.

FRONT OFFICE RECORD KEEPING SYSTEM

• Non-automated system- Guest folio in a manual system contains a series of columns
listing individual debit/credit entries accumulated during the occupancy. At the end of the
financial day, each column is totaled and the ending balance is carried forward as the
opening folio balance for the following day. Non automated front office record keeping
systems rely solely on handwritten forms.

• Sample Posting Machine Folio

Room (Last) NAME (First) (Initial) RATE FOLIO
NUMBER 403131
STREET ADDRESS OUT PHONE OUT
READING IN
CITY,STATE & ZIP IN
FROM
NO.PARTY CREDIT CARD CLERK FOLIO
TO
FOLIO
DATE REFERENCE CHARGES CREDITS BALANCE PREVIOUS
BALANCE PICKUP

Jul 27 A RESTR 103 ** 14.25 * 14.25 A* 14.25

Jul 27 A ROOM 103 **60.00 * 74.25 A* 74.25

Jul 27 A LDIST 103 * 80.63 A* 80.63

ul 27 A MISCCR 103 **18.38 * 62.25 A* 62.25

Jul 27 A PAID 103 **62.25 * .00

Last Balance
Amount Due

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• Semi-Automated system- In Semi-automatic accounting system, a bill folio is specially

designed depending upon the system used. All vouchers are posted with the help of
accounting machine. For each transaction room number to be updated is selected, the old
balance is picked up then date, department/reference number, amount of the transaction is
entered. The balancing and posting to visitor’s tabular ledger/ day book is done
simultaneously by the machine. After each transaction the balance of the bill is shown in
the balance column. The debit balance is the money owed by the guest to the hotel and the
credit balance means that the guest has paid more in advance than the bill due to him and
the balance is to be returned to the guest.

• Fully Automated system- In a fully automated hotel, the information from the reservation
department and from the reception department is transferred to an electronic folio.
Electronic folios are automatically cross referenced with the guest with the guest
registration card through local area network. Software has been developed which
automatically opens a bill folio on registration of a guest and it also records the telephone
meter reading. In this system there is only one column of the amount if amount is debited
then a sign of ‘+‘is affixed before the amount and in case of credit the sign of '-' is printed
before the amount. there is no need to pick up the balance as the balance is automatically
transaction are just handled once and the computer automatically records the transaction in
the respected accounts. This helps in controlling the errors in posting significantly.

FRONT OFFICE ACCOUNTING CYCLE

Creation of accounts: A guest account is created when the first financial transaction between the
hotel and a guest takes place. It may happen at one of the following stages:

a) At the time of reservation, if the guest makes an advance payment-guest backs the reservation.

b) At the time the hotel receives the advance payment for a booking after the
reservation has been made and before the arrival of the guest.
c) At the time of guest registration, when a room is allotted to the guest and payment is
received from the guest.

• Maintenance of accounts
All the monetary transactions are recorded and tracked during the stay of a guest. It
includes all charge purchases and the use of chargeable services offered by the hotel.

• Settlement of accounts
This is the final and concluding phase of the front office accounting cycle. This includes
preparing and presenting the final bill, and collecting the payment from the guest.
The settlement of account means zeroing the balance in a guest folio. The formula for
calculating the outstanding balance is:

NET OUTSTANDING AMOUNT= OPENING BALANCE + DEBIT -CREDITS

∞∞∞∞∞∞

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