UNIT 1 GUEST ACCOUNTING

 

GUEST ACCOUNTING

1.1 Folio:

  • A folio is a comprehensive record summarizing financial transactions for a specific account, either a guest or non-guest.
  • Different types include guest folios, master folios (for guest groups), non-guest folios (for non-guest business), and employee folios.
  • In manual systems, handwritten folios are common, while fully automated systems use electronic folios.

Types of Folios:

  1. Guest Folios:
    • Guest folios are accounts assigned to individual guests or guest rooms. Each registered guest is allocated a specific folio to keep track of all transactions incurred during their stay.
    • This type of folio includes charges for room rates, additional services, and any other expenses the guest may have incurred.
  2. Master Folios:
    • Master folios are designed for guest groups or events where multiple individuals share charges. These are often reserved for conference groups, wedding parties, or any situation where charges need to be collectively managed.
    • All charges for the group are consolidated into a master folio for easier tracking and settlement.
  3. Non-Guest (or City) Folios:
    • Non-guest folios, also known as city ledgers, are accounts assigned to non-guest entities. This may include businesses, agencies, or individuals not staying at the hotel but having transactions, like conference room rentals or restaurant services.
    • Charges on these folios are typically handled through direct billing or other non-guest payment methods.
  4. Employee Folios:
    • Employee folios are accounts designated for hotel staff with charge purchase privileges. This allows employees to make purchases within the hotel, and these transactions are recorded in their respective folios.
    • Such folios aid in maintaining transparency and accountability for employee-related expenses.

Special Circumstances and Folio Types:

  1. Special Folio:
    • In scenarios demanding unique categorization, special folios come into play. For instance, a guest may request a bifurcation of charges, with room rates in one folio and additional expenses in another, necessitating the creation of special folios to accommodate these preferences.
  2. Split Folio:
    • Split folios emerge in scenarios where a single room hosts multiple guests under different names. Common in conferences or group bookings, split folios ensure precise tracking of individual expenses within a shared space.
  3. Incidental Folio:
    • For group scenarios, an incidental folio tracks individual transactions of specific group members. This granular approach to accounting ensures accuracy in allocating charges within a larger group context.

Creation and Maintenance:

Folios are created and maintained at various stages of the guest cycle:

  • Pre-Arrival:
    • For guests with reservations, a preliminary folio is often created based on the anticipated charges.
    • If a deposit is received for future reservations, it is posted to an advanced deposit ledger.
  • Check-In:
    • Upon check-in, the reservation data is verified, and the guest is assigned a room number. An in-house electronic folio is created to record charges during the stay.
    • For walk-in guests, a folio is generated at the time of arrival.
  • During Stay:
    • Transactions such as room charges, restaurant bills, and any additional services are posted to the folio in real-time as the guest utilizes the hotel's services.
  • Check-Out:
    • At check-out, the final settlement is processed. The guest's outstanding balance, which includes all charges minus payments, is calculated.
    • The guest is presented with a detailed printed copy of the folio for review and settlement.

Manual vs. Automated Systems:

  • Manual Systems:
    • In manual systems, folios are often handwritten, and each transaction is recorded individually. This process requires meticulous attention to detail.
    • Physical folio trays or wells are used to organize and store folios.
  • Automated Systems:
    • Fully automated systems, on the other hand, utilize electronic folios that are automatically updated with each transaction.
    • Electronic folios are integrated with the front office system, ensuring accuracy and efficiency in tracking transactions.

Importance of Folios:

  1. Guest Transparency:
    • Folios provide guests with a transparent breakdown of all charges incurred during their stay, promoting trust and accountability.
  2. Accurate Billing:
    • For the hotel, folios are critical for accurate billing. They ensure that all services rendered are appropriately charged, and errors are minimized.
  3. Settlement Process:
    • During the settlement process at check-out, the folio serves as a detailed invoice, facilitating a smooth and transparent financial transaction.

 

1.2 Voucher:

  • Vouchers are detailed transaction documents gathered at the point of sale, serving as supporting evidence for transactions.
  • Common types include cash vouchers, credit card vouchers, charge vouchers, transfer vouchers, paid-out vouchers, correction vouchers, and allowance vouchers.

Components of a Voucher:

  1. Transaction Details:
    • A voucher comprehensively details the specifics of a transaction, including the nature of the expense, the date and time of the transaction, and any relevant codes or identifiers.
  2. Guest Information:
    • Vouchers include guest-related information, such as the guest's name, room number, and any unique identification details. This ensures that the transaction is correctly attributed to the respective guest.
  3. Authorization:
    • In cases of charge purchases, the voucher often includes an authorization section where the guest provides their signature, signaling their approval of the transaction. This signature serves as a form of consent and verification.
  4. Point of Sale (POS) Details:
    • Vouchers specify the point of sale, providing information about the outlet or department where the transaction occurred. This is crucial for accurate accounting and helps in categorizing expenses.

Types of Vouchers:

  1. Cash Vouchers:
    • These vouchers are generated when a guest makes a cash payment for services or amenities. The voucher outlines the details of the payment, ensuring a clear record of the transaction.
  2. Credit Card Vouchers:
    • When a guest opts to pay with a credit card, a credit card voucher is created. This document includes details of the card, the amount charged, and any necessary authorization information.
  3. Charge Vouchers:
    • Charge vouchers are instrumental in recording deferred payments, especially when guests receive services but delay the actual payment. These vouchers provide an essential link between the service rendered and the eventual settlement.
  4. Transfer Vouchers:
    • In cases where charges need to be transferred from one account to another, transfer vouchers are employed. This ensures that the correct accounts are debited or credited.
  5. Paid-Out Vouchers:
    • These vouchers come into play when a hotel disburses cash for various reasons, such as returning a deposit or providing petty cash. Paid-out vouchers record the outflow of cash from the hotel.
  6. Correction Vouchers:
    • In instances where errors are detected in the folio after the close of the business day, correction vouchers are used to rectify these mistakes. These vouchers help in maintaining the accuracy of financial records.
  7. Allowance Vouchers:
    • Allowance vouchers are generated for two primary reasons: as compensation for poor service or as rebates for coupon discounts. They serve to adjust the outstanding balance on a folio.

Significance of Vouchers:

  1. Documentary Evidence:
    • Vouchers act as tangible proof of financial transactions, providing a trail of evidence that can be referred to in case of disputes or discrepancies.
  2. Internal Control:
    • Vouchers contribute to internal control mechanisms by ensuring that every transaction is properly documented and authorized. This aids in preventing fraud and maintaining financial integrity.
  3. Accuracy in Accounting:
    • The detailed information contained in vouchers is crucial for accurate accounting. It allows financial records to be reconciled and audited with precision.
  4. Guest Dispute Resolution:
    • In the event of a dispute between the hotel and a guest regarding charges, vouchers serve as valuable documentation that can be used to clarify the nature and legitimacy of each transaction.
  5. Compliance and Reporting:
    • Vouchers play a pivotal role in compliance with financial reporting standards. They provide the necessary data for creating comprehensive financial reports for the hotel's stakeholders.

 

1.3 Ledger:

  • A ledger is a summary grouping of accounts, providing an overview of financial activity.
  • Front office ledgers consist of guest ledgers (charges and payments of hotel guests) and non-guest ledgers (charges and payments of non-guests).
  • Types of ledgers include guest ledger (individual guest accounts) and non-guest ledger or city ledger (non-guest accounts).

Essential Components of a Ledger:

  1. Accounts:
    • At the core of a ledger are individual accounts. Each account corresponds to a specific guest or non-guest entity, capturing the financial interactions over the course of their engagement with the hotel.
  2. Debits and Credits:
    • The fundamental principle of double-entry accounting is reflected in ledgers through debits and credits. Every transaction involves both a debit entry (an increase in assets or expenses) and a credit entry (a decrease in assets or an increase in revenue or equity).
  3. Balance:
    • The ledger maintains the ongoing balance of each account, representing the financial standing of a guest or entity. The balance is continuously updated with every transaction, ensuring real-time accuracy.
  4. Folio Details:
    • Specifics of each transaction, such as the date, description, and amount, are meticulously recorded in the ledger. This level of detail allows for a granular analysis of financial activities.

Types of Ledgers:

  1. Guest Ledger:
    • The guest ledger is the focal point of hospitality accounting, encapsulating the financial journey of individual guests. It includes details of charges, payments, and outstanding balances. Deposits for future reservations may also be recorded here.
  2. Non-Guest Ledger or City Ledger:
    • The non-guest ledger, often referred to as the city ledger, encapsulates the financial dealings with entities other than individual guests. This includes transactions with businesses, agencies, credit card payments, and outstanding amounts for various services.

Ledger Types by Nature of Transactions:

  1. Transient Ledger:
    • This ledger captures the financial interactions with guests who have made reservations but have not yet checked in. It includes advanced deposits and serves as a preparatory record for the guest ledger.
  2. Permanent Ledger:
    • The permanent ledger documents the financial activities of guests during their actual stay. It provides a comprehensive record of charges, payments, and any adjustments made during the guest's occupancy.

Role and Significance of Ledgers:

  1. Financial Visibility:
    • Ledgers offer unparalleled visibility into the financial health of a hotel. They provide a real-time snapshot of accounts, enabling management to make informed decisions.
  2. Audit Trail:
    • The ledger serves as a meticulous audit trail, allowing for the retrospective examination of financial transactions. This is instrumental in ensuring accountability and transparency.
  3. Credit Monitoring:
    • For guests with charge privileges, the ledger becomes a crucial tool for monitoring credit limits and ensuring that guests do not exceed their approved credit amounts.
  4. Reporting and Analysis:
    • Ledgers are instrumental in generating various financial reports. These reports aid in strategic planning, budgeting, and forecasting for the hotel.
  5. Accountability and Compliance:
    • By maintaining accurate and detailed records, ledgers contribute to accountability and compliance with financial regulations. This is imperative for the hotel's reputation and legal standing.
  6. Decision Support:
    • Management decisions related to revenue strategies, pricing, and service offerings are often informed by insights derived from ledger analyses. This supports the overall strategic direction of the hotel.

 

1.4 Accounts:

  • An account is a form accumulating and summarizing financial data, having two entries: debit (charges) and credit (payments).
  • T-Accounts are widely used for representation, with accounts categorized into guest accounts and non-guest (city) accounts.

Understanding the Anatomy of Accounts:

  1. Accumulation and Summarization:
    • At its core, an account serves as a repository where financial data is accumulated, summarized, and ultimately brought to its ending balance. It functions as a ledger for a specific category, capturing the ebb and flow of monetary transactions.
  2. Double-Entry Accounting:
    • Embracing the foundational principle of double-entry accounting, every account is characterized by two entries – a debit (dr) representing charges or expenses and a credit (cr) reflecting payments. This dual-entry system ensures the maintenance of financial equilibrium.
  3. T-Account Representation:
    • Visualizing an account often involves the use of a T-account, a graphical representation that segregates debit entries on the left side and credit entries on the right. This concise format aids in understanding the financial status of an account at a glance.

Types of Accounts:

  1. Guest Accounts:
    • Guest accounts are the lifeblood of guest accounting. Created when guests guarantee reservations or register at the front desk, these accounts meticulously document all transactions throughout a guest's stay. This includes charges, payments, and adjustments.
  2. Non-Guest or City Accounts:
    • Non-guest or city accounts encapsulate the financial interactions with entities beyond individual guests. This encompasses transactions with businesses, agencies, and any outstanding amounts for services rendered.

Roles and Functions of Accounts:

  1. Financial Tracking:
    • The primary function of an account is to track and record financial transactions. Whether it's a guest account detailing room charges or a non-guest account for external services, accounts provide a chronological record of financial activities.
  2. Debits and Credits Management:
    • Accounts are instrumental in managing debits and credits. They facilitate the meticulous recording of charges and expenses (debits) and payments (credits), ensuring accuracy and compliance with accounting principles.
  3. Internal Control:
    • Accounts contribute significantly to internal control mechanisms. They enable the verification of financial entries, ensuring that the recorded transactions align with the financial activities undertaken by guests and non-guest entities.
  4. Balance Calculation:
    • A key function of an account is to calculate and display the balance at any given moment. The net outstanding balance is determined by the formula: Previous Balance + Debits - Credits.
  5. Guest Ledger vs. Non-Guest Ledger:
    • Distinct types of accounts, such as guest and non-guest ledgers, serve specific roles. Guest ledgers document the financial journey of individuals, while non-guest ledgers manage transactions with external entities, contributing to a holistic financial overview.

Significance in Guest Accounting:

  1. Guest Charge Privileges:
    • Accounts are pivotal in managing guest charge privileges. Guests who present an imprint of an acceptable credit card or direct billing authorization gain the ability to make charge purchases, documented meticulously in their accounts.
  2. Cash and Credit Monitoring:
    • For guests with charge privileges, accounts become crucial tools for monitoring credit limits. By tracking transactions in real-time, hotels can ensure guests do not exceed approved credit amounts.
  3. Record Keeping and Reporting:
    • Accounts serve as the foundation for robust record-keeping systems. They facilitate the generation of detailed reports, providing insights into the financial health of the hotel. This aids in strategic decision-making and planning.

 

1.5 Point of Sale (POS):

  • The point of sale is where goods or services are purchased, also known as a revenue center.
  • In the context of charge privileges, monitoring transactions at different points of sale is crucial, especially in fully automated systems.

CREATION & MAINTENANCE OF ACCOUNTS

2.1 Charge Privileges:

  • Guests with charge privileges can make deferred payments using methods like credit cards or direct billing.
  • Charge privileges are established at registration through credit card imprints or direct billing authorizations.
  • Guests who pay in advance in cash may not be granted charge privileges.

2.2 Cash & Credit Monitoring:

  • Front offices monitor guest and non-guest accounts to ensure they stay within acceptable credit limits.
  • Daily reports highlight high-risk or high-balance accounts, preventing excessive charges beyond credit limits.
  • Control measures include floor limits (credit card company limits) and house limits (hotel limits).

2.3 Account Maintenance & Record Keeping Systems:

  • Net outstanding balance (NOB) is a key metric in account maintenance, calculated as previous balance + debits - credits.
  • Record-keeping systems vary from manual to fully automated, with electronic systems facilitating accurate monitoring of prepayments and deposits.
  • Electronic systems streamline the transfer of information from reservations to electronic folios.

Electronic Record Keeping Systems:

  1. Fully-Automated Systems:
    • The zenith of technological integration, fully automated systems revolutionize account maintenance. Transactions seamlessly flow into electronic folios, eradicating the need for manual ledger updates. From pre-arrival reservations to real-time tracking, these systems offer unparalleled efficiency.
  2. Real-Time Updates:
    • In fully automated systems, electronic folios receive real-time updates. This not only ensures accuracy in reflecting the current financial status but also facilitates instantaneous decision-making based on the most recent data.
  3. Integration with Other Systems:
    • The power of fully automated systems lies in their integration capabilities. These systems effortlessly integrate with reservation systems, point-of-sale systems, and other modules, creating a cohesive financial ecosystem.

Advantages of Electronic Record Keeping:

  1. Efficiency and Accuracy:
    • Electronic record-keeping systems significantly enhance efficiency and accuracy. Automation reduces the likelihood of human errors, ensuring that financial records are a true reflection of the transactions undertaken.
  2. Real-Time Reporting:
    • Real-time reporting is a hallmark of electronic systems. Decision-makers have access to up-to-the-minute financial data, allowing for proactive strategies and swift responses to emerging financial trends.
  3. Streamlined Audit Processes:
    • Auditing becomes a streamlined process with electronic record-keeping. Instead of sifting through manual ledgers, auditors can access digitized records, expediting the verification process and enhancing overall audit efficiency.

 

TRACKING TRANSACTIONS

3.1 Cash Payments:

  • Cash payments reduce the net outstanding balance (NOB) of guest folios.
  • Transactions are documented using cash vouchers, especially when cash is paid at the front desk.

3.2 Charge Purchase:

  • Charge purchases involve deferred payment transactions, increasing the outstanding balance of a folio.
  • Charge vouchers support these transactions, and information from point of sale outlets is communicated to the front office for proper posting.

3.3 Account Corrections:

  • Account corrections rectify posting errors in a folio, detected before the close of the business day.
  • Correction vouchers are used as supporting documents, and corrections may increase or decrease the net outstanding balance.

3.4 Account Allowance:

  • Account allowances may compensate for poor service or serve as rebates for discounts, reducing the outstanding balance.
  • Allowance vouchers, often requiring management approval, support these transactions.

3.5 Account Transfer:

  • Account transfers involve moving funds between two different accounts, impacting the balances of both.
  • Transfer vouchers support this transaction, leading to a decrease in the originating folio's balance and an increase in the destination folio's balance.

3.6 Cash Advance:

  • Cash advances involve outflows of cash from the hotel, either directly or on behalf of the guest.
  • Cash advance transactions are of two types: paid-out (disbursed on behalf of the guest) and petty cash (for departmental expenses).

INTERNAL CONTROL

  • Internal control is vital for tracking transaction documentation, verifying entries and balances, and identifying vulnerabilities in the accounting system.
  • Auditing is the primary process for ensuring internal control, verifying front office accounting records for accuracy and completeness.