formats
Thursday, 6 October 2016
Topic – Front Office Accounting
Objectives-
At the end of the class-
• You should be able to understand the importance of accounting in front office.
• You should be able to distinguish between guest accounts and non-guest accounts.
• You should be able to understand different types of accounts.
• You should be able to understand various accounting tools.
• You should be able to understand non automated, semi auto mated and fully automated accounting systems.
I- Front Office Accounting System:
• The front office accounting system is responsible for:
a) Creating and maintaining an accurate accounting record for each guest or non-guest in the hotel
b) Tracking all financial transactions throughout the guest cycle
c) Ensuring internal control over cash and non-cash transactions
d) Recording settlement for all goods & services provided
• The front office accounting system shall be customized and tailored to track each hotel’s needs. Therefore, no two hotels have exactly the same front office accounting systems.
II- General Concepts of Front Office Accounting:
• Below is a brief description of some accounting terminologies used frequently in the front office department:
1- Accounts:
• An Account is a form on which financial data are accumulated, summarized and brought to its ending balance. Moreover, all accounts shall have two entries referred to as Debit (dr) (or charges) versus Credit (cr) (or payments).
• The most widely used representation of accounts is the T-Account, which summarizes debit entries on the left-hand side and credit entries on the right-hand side.
• Hotels operating under the manual system get use of journal forms to account for different front office accounting transactions.
• As far as front office accounting is concerned, there are two major types of accounts widely used:
a) Guest accounts describe all charges and payments of guests who are already registered at the hotel.
b) Non-guest (house or city) accounts: describe all charges and payments of non-guests. To illustrate, a potential guest sending a certain deposit to guarantee a reservation is a non-guest. Moreover, charges and payments of guests who checkout with any method of payment other than cash, shall be opened a non-guest account. Lastly, visitors and employees with charge privileges shall be opened non-guest accounts.
2- Folios:
• A folio is a statement of all transactions (i.e. debits & credits) affecting the balance of a single account. At Checkout, any guest folio should be balanced to 0 through full cash payment, credit card transfer, personal check transfer, special program transfer, and direct billing transfer…
• The correct way of maintaining folios starts with proper posting, which is the process of recording transactions on a folio (i.e. proper folio, proper location and proper amount)
• Under the manual, semi automated and fully automated systems, folios are called hand-written folios, machine-posted folios, and computer-based electronic folios respectively. Moreover, all folios shall have a unique serial number for internal control and storing purposes.
• In the front office department, there are four common types of folios used:
a) Guest folios: accounts assigned to individual persons or guestrooms
b) Master Folios: accounts assigned to more than one person or guest room; usually reserved for guest groups
c) Non-Guest (or semi-permanent) folios: accounts assigned to non-guest businesses or agencies with hotel charge purchase privileges
d) Employee Folios: accounts assigned to employees with charge purchase privileges
• Apart from the above mentioned common folios, front office department get use of some other types of folios such as A-type, B-type, C-type, D-type, and E-type folios.
3- Vouchers:
• Vouchers depict the details of the transaction information gathered at the source of transaction and is, hence, a supporting documents used only for internal control purposes. Below are some of the commonly used vouchers in the hospitality industry:
a) Cash vouchers
b) Credit card vouchers
c) Charge vouchers
d) Transfer vouchers
e) Paid-out vouchers
f) Correction vouchers
g) Allowance vouchers
4- Points of sale [i.e. POS]:
• A point of sale is the location at which goods or services are purchased; sometimes called a revenue center. Moreover, due to technology breakthrough, some non-traditional point of sales emerged such as in-room movie & in-room vending service systems.
• Since charges are usually incurred at remote points of sale, and guest and non-guest folios are maintained at the front office department, posting of different guest and non-guest charges shall be performed. An electronic transfer ensures this, under the fully automated system. Under manual and semi automated systems posting shall be done by a physical submission of different vouchers to the front office department.
• When posting charges, the following items shall be considered:
a) Amount of the charge
b) Name of the point of sales outlet
c) Room number & name of the guest
d) Brief description of the charge
e) Guest signature & employee identification
5- Ledgers:
• The front office ledger is the collection of front office account folios, which usually include guest ledgers (i.e. charges and payments of all guests staying at the hotel).
• At any moment in time, the account receivable includes the addition of guest ledger and non-guest ledger (or city ledger) which refers to charges and payments of all non-guests.
III- Creation and Maintenance of Guest Accounts:
• All guest folios shall be created during the pre-arrival or arrival stage of the guest cycle. Moreover, folios might be either placed in front desk folio tray [i.e. posting tray, folio well, or bucket] or stored as an electronic guest folios in fully automated systems.
• As far as walk-ins are concerned, all their guest folios are created at the arrival stage!
1- Record keeping systems:
a) Non- automated systems: Ensured through a series of columns listing individual debit and credit entries accumulated during the occupancy stage after which and establishment of an ending outstanding balance is needed.
b) Semi-automated systems: Under this very system, all guest transactions should be printed sequentially on a machine-posted folio. Later, the front office clerk needs to come up with the folio outstanding balance. It is extremely important here to mention that, under this very system, each account’s previous balance shall be re-entered each time a transaction is posted to the folio.
c) Fully-automated systems: All guest charges are automatically posted to an electronic folio
2- Guest charge privileges:
• Potential guests who would like to have guest charge privileges shall present an imprint of an acceptable credit card or direct billing authorization at registration. Failing to do so, guests would have to pay, in full, all their charges through cash, hence called Paid-in-Advance [PIA] guests and have, hence, have no post status.
3- Credit monitoring:
• In order to monitor and control charge privileges, the front office clerk should check whether the total net purchases are less than the minimum of floor Limit (i.e.: credit card company's limit) and house limit (i.e. hotel's limit). At least, each day, lists of guests with high risk or high balance accounts shall be communicated to all point of sale outlets. This is vital since, failing to do so, will let point of sales outlets continue giving charge privileges to a point that eventually the credit card company refuses to pay the amount of money exceeding its limit. This will cause very serious financial losses to the hotel.
4- Account maintenance:
• Whatsoever system hotels operate, maintenance of guest and non-guest accounts is ensured by the following formula:
Net outstanding balance = Previous balance + Debits - Credits
NOB = PB + DR - CR
IV- Tracking Transactions:
• Under the manual and semi-automated systems, tracking transactions is ensured through an intensive use of vouchers. On the other hand, Under fully automated systems, tracking transactions is ensured through on-line electronic transfer of transactional information from remote points of sale to the front office main frame terminal.
• In accounting, a transaction is an exchange of goods and services for cash or a promise to pay. Under this very assumption, "nothing happens until a transaction occurs". This means that front office clerks shall first of all have a transaction, its supporting documents (i.e. vouchers, invoices…) to be able later to debit or credit certain accounts!
• In hotels transactions might have the form of:
a) Cash payment
b) Charge purchase
c) Account correction
d) Account allowance
e) Current transfer
f) Cash Advance
1- Cash payment:
• In this very transaction, front office clerks shall post cash payment as a credit in the guest folio. Moreover, cash vouchers shall be used as a transaction-supporting document.
2- Charge purchase:
• Charge purchases represent deferred payment transactions that increase the outstanding balance of a folio account. In this transaction type, front office clerks shall use charge vouchers as a transaction-supporting document.
3- Account correction:
• Account correction is used to resolve a posting error in a folio detected at the day the error is made (i.e. before the closing of the business day). In this transaction, front office clerks shall use correction vouchers as a transaction-supporting document.
4- Account allowance:
• Account allowances occur because of two reasons:
a) Either as compensation of poor service, or as rebates for coupon discounts. That way, guest outstanding balance decreases.
b) As to correct a posting error detected after the closing of the business day.
• For both reasons, front office clerks shall prepare an allowance voucher as a transaction supporting document.
V- Internal Control:
• In the hotel industry, the main purpose of internal control is to track transaction documentation, verify account entries and account balances, and to identify vulnerabilities in the accounting system. The keyword to internal control is auditing, which is the process of verifying front office accounting records for accuracy and completeness.
• Below are some forms that are of extreme importance to internally control, one of the most vital assets in the hotel (i.e. cash):
1- Front office cash sheet:
• The front office cash sheet lists each cash receipt or disbursement in order to reconcile cash on hand at the end of a cashier's shift with the documented transaction that occurred during the same shift.
2- Cash, house banks or petty cash:
• Petty cash is the amount of cash assigned to a cashier so that he/she can handle the various transactions that occur in a particular work shift.
• At the beginning of each shift, all cashiers must sign their cash banks and at the end of the shift, shall deposit all cash, checks, and other negotiable instruments in the general cashier's safe deposit box. Moreover, at the end of each shift, cashiers should watch out for cash discrepancies (i.e. any difference between front office cash sheet and the actual amounts in their cash drawers). Cash discrepancies might have the form of cash overages, shortages, or due backs
•Lastly, cashiers might come up with the net cash receipt, which is:
Amount of all cash, checks, and other negotiable instruments in cashier’s drawer – amount of the initial cash bank + all paid outs
3- Audit control:
• Along with the fact that hotels might employ internal control auditors, at least once in a year, (especially for hotels traded in the stock market) to get use of external certified public accountants responsible for approving hotel's accounts.
VI- Settlement of Accounts:
• One of the responsibilities of front office clerks is to settle guest accounts, which means the eventual collection of payment for outstanding account balances (i.e.: bringing account balances to 0]. This is usually ensured either by full cash payment, transfer to an approved credit card, personal check, special program, or direct billing account…
What is an account ?
An account may be imagined as a bin or container in which the results of various
business transactions are stored. The increases and decreases in an account are
calculated and the resulting monetary amount is called as account balance. Any
financial transaction that occurs in the hotel may affect several accounts. Front office
accounts are recordkeeping devices to store information about guest and non-guest
financial transactions.
The simplest form of writing an account is the “T” form
{as it resembles the letter T}
Account name
Charges Payments
Computers have replaced the use of these T accounts. However the principle behind
usage of accounts remains same.
Types of accounts at the front desk:
1} Guest accounts:
A guest account is a record of financial transactions which occur between a guest and the hotel. Guest accounts are created when guests guarantee their reservations or when they register at the front desk. During occupancy, the front office is responsible for and records al transactions affecting the balance of a guest account. The front office usually seeks payment for any outstanding guest account balance during the settlement stage of the guest cycle. Certain circumstances may require the guest to make a partial or full payment at other times during the guest cycle. For example, if the front office is to enforce the hotel's house limit, guests who exceed that limit may be asked to settle part or all of the outstanding balance. When there is a house limit, account settlement action is initiated when the account balance exceeds a predetermined limit, not at the time of check-out.
2} Non-guest accounts:
A hotel may extend in-house charge privileges to local businesses or agencies as a means of promotion, or to groups sponsoring meetings at the hotel. The front office
creates non-guest accounts to track these transactions. These accounts may also be
called house accounts or city accounts. Non-guest accounts are also created when a
former guest fails to settle his or her account at the time of departure. When the
guest's status changes to non-guest, the responsibility for account settlement shifts
from the front office to the back office {accounting division}. Unlike guest accounts, which are complied daily, non-guest accounts are normally billed on a monthly basis by the hotel's accounting division
Voucher:
A voucher details a single transaction to be posted to a front office account. This
document lists detailed transaction information gathered at the source of the
transaction. The voucher is then sent to the front office for posting onto the guest folio.
Usually any service or goods brought on credit by the guest has to be supported by a voucher.
Types of voucher:
Charge vouchers such as Restaurant/ Bar check
Cask advance/Paid out voucher
Allowance vouchers and Correction vouchers
Cash Vouchers
BASIC PRINCIPLES OF ACCOUNTING:
• Any amount paid by the guest to the hotel is posted in the debit column. A debit{dr.} therefore is moneys owed by the guest to the hotel
• Any money received from the guest is posted in the credit column. A credit therefore is any money paid by the guest towards settling his/her bill including advance deposits.
• The balance column reflects a progressive difference between debits and credits
calculated on basis of the formula
“ previous balance + debits – credits = net outstanding balance”
These principles are applicable to the guest folio/bill in which all cash and
credit transactions are recorded for each resident guest which increase or decrease the balance of a single account. It is also called as “guest account card”. In some hotels it is also called as Guest weekly bill.
The debit transactions are recorded to the left of the folio while the credit transactions are recorded to the right. The outstanding balance is calculated by subtracting the right from the left.
In the manual system the folios are maintained in hard copies in folio racks
at the cashier’s cabin or back office. In an automated system the folio remains in the computer and a hard copy is printed out only at the time of guest check out. Each entry into the folio is called a posting . Each posting is recorded sequentially in the folio in the order of transactions on a given date.
When an account is created, it is assigned a folio with a starting balance
of zero.
A debit entry will increase the guest’s outstanding balance while a credit entry will decrease the outstanding balance.
At departure the outstanding balance has to be returned to zero by cash payment or by transfer to an approved credit card or to a direct billing account
Guest folio format :
POINTS TO REMEMBER WITH REGARD TO A FOLIO:
1. A folio is raised as soon as the guest checks in.
2. The initial outstanding balance {when it is opened} of the folio is zero
3. Details on a folio: Guest name, Room Number, date of arrival, date of departure,
Room rate, address, billing instructions. Each folio has a serial no. which will help
keep a control on folios for the purpose of audit.
4. The cashier is responsible for the guest folio till the guest departs.
Types of folios used in hotels:
• Individual guest account card/folio: To record transactions made by an individual
or independent guest with the hotel. Also called as guest folio
• Group folio/master folio: One folio for the whole group and this folio is required to
record all transactions made by the group{which are part of the package of the
group}
• Semi-Permanent or non-guest folios: In this folio the credit financial transactions
made by non-resident guests with the hotel are recorded. Also known as city
account card or non-resident guest account card.
• Employee folio: All the financial transactions {if any} made by the employees are
recorded
• Permanent/ companies/airlines folio: Separate folios are maintained for all
companies, agencies, organizations with whom the hotel has permanent billing
arrangements.
• Split Folios: Split folios are those when two guests wish to have separate accounts
though they share the same room. Room charges will feature on one folio for
convenience, other charges would reflect individually in split folios.
Another case of split folios is when a company executive would like to
maintain two separate accounts one that is charged to his/her company while
the other is to record his/her personal expenses.
Ledgers used at the front desk
A front office ledger is a collection of front office account folios
There are two main types used at the front desk
1} Guest ledger {Transient ledger/front office ledger and room ledger}
Guest ledger is the total set of all account folios of guests registered in the hotel
{in-house guest} hence any debit entry to the guest folio will not only increase the
guests balance but will also increase the net outstanding balance of the guest
ledger.
2} City ledger {Non-Guest Ledger}
City ledger records all accounts that do not belong to resident guests. At the
time of check out if the resident guests outstanding balance is not brought to zero ,
the same is transferred from the guest ledger to the city ledger.
At the time of account transfer, the responsibility for account collection shifts
from the front office to the accounting division (back office).
Accounts which are included in city ledger:
• Credit card payment accounts
• Direct billing accounts {guests’ whose bill will be settled by the company}
• Airlines
• Travel agencies
• Skipper’s account
• Bad cheques account {Bounced cheques of guests}
• Disputed bills account
• Retention charges account from DNA guests
Account aging:
Most of the city ledger accounts are settled within 30 days of billing which is
generally satisfactory. However there will be some which will take longer than 30
days to collect . The hotel should establish methods for tracking past due
accounts which may be based on the date the charges were incurred. This
practice of scheduled billings is normally referred to as account aging. At large
properties the accounting division monitors account aging while at smaller
properties the night auditor may assume this role. An account age analysis sheet
identifies which account receivables are 30, 60, 90 or more days old. Accounts
lesser than 30 days old are considered current. The accounts over 30 days are
considered overdue and the ones above 90 days are delinquent The front office
should maintain a list of accounts over 90 days due. Guests asking for
reservation on an overdue account may be asked to pay cash or by a valid
credit card until the account is considered current
Objectives-
At the end of the class-
• You should be able to understand the importance of accounting in front office.
• You should be able to distinguish between guest accounts and non-guest accounts.
• You should be able to understand different types of accounts.
• You should be able to understand various accounting tools.
• You should be able to understand non automated, semi auto mated and fully automated accounting systems.
I- Front Office Accounting System:
• The front office accounting system is responsible for:
a) Creating and maintaining an accurate accounting record for each guest or non-guest in the hotel
b) Tracking all financial transactions throughout the guest cycle
c) Ensuring internal control over cash and non-cash transactions
d) Recording settlement for all goods & services provided
• The front office accounting system shall be customized and tailored to track each hotel’s needs. Therefore, no two hotels have exactly the same front office accounting systems.
II- General Concepts of Front Office Accounting:
• Below is a brief description of some accounting terminologies used frequently in the front office department:
1- Accounts:
• An Account is a form on which financial data are accumulated, summarized and brought to its ending balance. Moreover, all accounts shall have two entries referred to as Debit (dr) (or charges) versus Credit (cr) (or payments).
• The most widely used representation of accounts is the T-Account, which summarizes debit entries on the left-hand side and credit entries on the right-hand side.
• Hotels operating under the manual system get use of journal forms to account for different front office accounting transactions.
• As far as front office accounting is concerned, there are two major types of accounts widely used:
a) Guest accounts describe all charges and payments of guests who are already registered at the hotel.
b) Non-guest (house or city) accounts: describe all charges and payments of non-guests. To illustrate, a potential guest sending a certain deposit to guarantee a reservation is a non-guest. Moreover, charges and payments of guests who checkout with any method of payment other than cash, shall be opened a non-guest account. Lastly, visitors and employees with charge privileges shall be opened non-guest accounts.
2- Folios:
• A folio is a statement of all transactions (i.e. debits & credits) affecting the balance of a single account. At Checkout, any guest folio should be balanced to 0 through full cash payment, credit card transfer, personal check transfer, special program transfer, and direct billing transfer…
• The correct way of maintaining folios starts with proper posting, which is the process of recording transactions on a folio (i.e. proper folio, proper location and proper amount)
• Under the manual, semi automated and fully automated systems, folios are called hand-written folios, machine-posted folios, and computer-based electronic folios respectively. Moreover, all folios shall have a unique serial number for internal control and storing purposes.
• In the front office department, there are four common types of folios used:
a) Guest folios: accounts assigned to individual persons or guestrooms
b) Master Folios: accounts assigned to more than one person or guest room; usually reserved for guest groups
c) Non-Guest (or semi-permanent) folios: accounts assigned to non-guest businesses or agencies with hotel charge purchase privileges
d) Employee Folios: accounts assigned to employees with charge purchase privileges
• Apart from the above mentioned common folios, front office department get use of some other types of folios such as A-type, B-type, C-type, D-type, and E-type folios.
3- Vouchers:
• Vouchers depict the details of the transaction information gathered at the source of transaction and is, hence, a supporting documents used only for internal control purposes. Below are some of the commonly used vouchers in the hospitality industry:
a) Cash vouchers
b) Credit card vouchers
c) Charge vouchers
d) Transfer vouchers
e) Paid-out vouchers
f) Correction vouchers
g) Allowance vouchers
4- Points of sale [i.e. POS]:
• A point of sale is the location at which goods or services are purchased; sometimes called a revenue center. Moreover, due to technology breakthrough, some non-traditional point of sales emerged such as in-room movie & in-room vending service systems.
• Since charges are usually incurred at remote points of sale, and guest and non-guest folios are maintained at the front office department, posting of different guest and non-guest charges shall be performed. An electronic transfer ensures this, under the fully automated system. Under manual and semi automated systems posting shall be done by a physical submission of different vouchers to the front office department.
• When posting charges, the following items shall be considered:
a) Amount of the charge
b) Name of the point of sales outlet
c) Room number & name of the guest
d) Brief description of the charge
e) Guest signature & employee identification
5- Ledgers:
• The front office ledger is the collection of front office account folios, which usually include guest ledgers (i.e. charges and payments of all guests staying at the hotel).
• At any moment in time, the account receivable includes the addition of guest ledger and non-guest ledger (or city ledger) which refers to charges and payments of all non-guests.
III- Creation and Maintenance of Guest Accounts:
• All guest folios shall be created during the pre-arrival or arrival stage of the guest cycle. Moreover, folios might be either placed in front desk folio tray [i.e. posting tray, folio well, or bucket] or stored as an electronic guest folios in fully automated systems.
• As far as walk-ins are concerned, all their guest folios are created at the arrival stage!
1- Record keeping systems:
a) Non- automated systems: Ensured through a series of columns listing individual debit and credit entries accumulated during the occupancy stage after which and establishment of an ending outstanding balance is needed.
b) Semi-automated systems: Under this very system, all guest transactions should be printed sequentially on a machine-posted folio. Later, the front office clerk needs to come up with the folio outstanding balance. It is extremely important here to mention that, under this very system, each account’s previous balance shall be re-entered each time a transaction is posted to the folio.
c) Fully-automated systems: All guest charges are automatically posted to an electronic folio
2- Guest charge privileges:
• Potential guests who would like to have guest charge privileges shall present an imprint of an acceptable credit card or direct billing authorization at registration. Failing to do so, guests would have to pay, in full, all their charges through cash, hence called Paid-in-Advance [PIA] guests and have, hence, have no post status.
3- Credit monitoring:
• In order to monitor and control charge privileges, the front office clerk should check whether the total net purchases are less than the minimum of floor Limit (i.e.: credit card company's limit) and house limit (i.e. hotel's limit). At least, each day, lists of guests with high risk or high balance accounts shall be communicated to all point of sale outlets. This is vital since, failing to do so, will let point of sales outlets continue giving charge privileges to a point that eventually the credit card company refuses to pay the amount of money exceeding its limit. This will cause very serious financial losses to the hotel.
4- Account maintenance:
• Whatsoever system hotels operate, maintenance of guest and non-guest accounts is ensured by the following formula:
Net outstanding balance = Previous balance + Debits - Credits
NOB = PB + DR - CR
IV- Tracking Transactions:
• Under the manual and semi-automated systems, tracking transactions is ensured through an intensive use of vouchers. On the other hand, Under fully automated systems, tracking transactions is ensured through on-line electronic transfer of transactional information from remote points of sale to the front office main frame terminal.
• In accounting, a transaction is an exchange of goods and services for cash or a promise to pay. Under this very assumption, "nothing happens until a transaction occurs". This means that front office clerks shall first of all have a transaction, its supporting documents (i.e. vouchers, invoices…) to be able later to debit or credit certain accounts!
• In hotels transactions might have the form of:
a) Cash payment
b) Charge purchase
c) Account correction
d) Account allowance
e) Current transfer
f) Cash Advance
1- Cash payment:
• In this very transaction, front office clerks shall post cash payment as a credit in the guest folio. Moreover, cash vouchers shall be used as a transaction-supporting document.
2- Charge purchase:
• Charge purchases represent deferred payment transactions that increase the outstanding balance of a folio account. In this transaction type, front office clerks shall use charge vouchers as a transaction-supporting document.
3- Account correction:
• Account correction is used to resolve a posting error in a folio detected at the day the error is made (i.e. before the closing of the business day). In this transaction, front office clerks shall use correction vouchers as a transaction-supporting document.
4- Account allowance:
• Account allowances occur because of two reasons:
a) Either as compensation of poor service, or as rebates for coupon discounts. That way, guest outstanding balance decreases.
b) As to correct a posting error detected after the closing of the business day.
• For both reasons, front office clerks shall prepare an allowance voucher as a transaction supporting document.
V- Internal Control:
• In the hotel industry, the main purpose of internal control is to track transaction documentation, verify account entries and account balances, and to identify vulnerabilities in the accounting system. The keyword to internal control is auditing, which is the process of verifying front office accounting records for accuracy and completeness.
• Below are some forms that are of extreme importance to internally control, one of the most vital assets in the hotel (i.e. cash):
1- Front office cash sheet:
• The front office cash sheet lists each cash receipt or disbursement in order to reconcile cash on hand at the end of a cashier's shift with the documented transaction that occurred during the same shift.
2- Cash, house banks or petty cash:
• Petty cash is the amount of cash assigned to a cashier so that he/she can handle the various transactions that occur in a particular work shift.
• At the beginning of each shift, all cashiers must sign their cash banks and at the end of the shift, shall deposit all cash, checks, and other negotiable instruments in the general cashier's safe deposit box. Moreover, at the end of each shift, cashiers should watch out for cash discrepancies (i.e. any difference between front office cash sheet and the actual amounts in their cash drawers). Cash discrepancies might have the form of cash overages, shortages, or due backs
•Lastly, cashiers might come up with the net cash receipt, which is:
Amount of all cash, checks, and other negotiable instruments in cashier’s drawer – amount of the initial cash bank + all paid outs
3- Audit control:
• Along with the fact that hotels might employ internal control auditors, at least once in a year, (especially for hotels traded in the stock market) to get use of external certified public accountants responsible for approving hotel's accounts.
VI- Settlement of Accounts:
• One of the responsibilities of front office clerks is to settle guest accounts, which means the eventual collection of payment for outstanding account balances (i.e.: bringing account balances to 0]. This is usually ensured either by full cash payment, transfer to an approved credit card, personal check, special program, or direct billing account…
What is an account ?
An account may be imagined as a bin or container in which the results of various
business transactions are stored. The increases and decreases in an account are
calculated and the resulting monetary amount is called as account balance. Any
financial transaction that occurs in the hotel may affect several accounts. Front office
accounts are recordkeeping devices to store information about guest and non-guest
financial transactions.
The simplest form of writing an account is the “T” form
{as it resembles the letter T}
Account name
Charges Payments
Computers have replaced the use of these T accounts. However the principle behind
usage of accounts remains same.
Types of accounts at the front desk:
1} Guest accounts:
A guest account is a record of financial transactions which occur between a guest and the hotel. Guest accounts are created when guests guarantee their reservations or when they register at the front desk. During occupancy, the front office is responsible for and records al transactions affecting the balance of a guest account. The front office usually seeks payment for any outstanding guest account balance during the settlement stage of the guest cycle. Certain circumstances may require the guest to make a partial or full payment at other times during the guest cycle. For example, if the front office is to enforce the hotel's house limit, guests who exceed that limit may be asked to settle part or all of the outstanding balance. When there is a house limit, account settlement action is initiated when the account balance exceeds a predetermined limit, not at the time of check-out.
2} Non-guest accounts:
A hotel may extend in-house charge privileges to local businesses or agencies as a means of promotion, or to groups sponsoring meetings at the hotel. The front office
creates non-guest accounts to track these transactions. These accounts may also be
called house accounts or city accounts. Non-guest accounts are also created when a
former guest fails to settle his or her account at the time of departure. When the
guest's status changes to non-guest, the responsibility for account settlement shifts
from the front office to the back office {accounting division}. Unlike guest accounts, which are complied daily, non-guest accounts are normally billed on a monthly basis by the hotel's accounting division
Voucher:
A voucher details a single transaction to be posted to a front office account. This
document lists detailed transaction information gathered at the source of the
transaction. The voucher is then sent to the front office for posting onto the guest folio.
Usually any service or goods brought on credit by the guest has to be supported by a voucher.
Types of voucher:
Charge vouchers such as Restaurant/ Bar check
Cask advance/Paid out voucher
Allowance vouchers and Correction vouchers
Cash Vouchers
BASIC PRINCIPLES OF ACCOUNTING:
• Any amount paid by the guest to the hotel is posted in the debit column. A debit{dr.} therefore is moneys owed by the guest to the hotel
• Any money received from the guest is posted in the credit column. A credit therefore is any money paid by the guest towards settling his/her bill including advance deposits.
• The balance column reflects a progressive difference between debits and credits
calculated on basis of the formula
“ previous balance + debits – credits = net outstanding balance”
These principles are applicable to the guest folio/bill in which all cash and
credit transactions are recorded for each resident guest which increase or decrease the balance of a single account. It is also called as “guest account card”. In some hotels it is also called as Guest weekly bill.
The debit transactions are recorded to the left of the folio while the credit transactions are recorded to the right. The outstanding balance is calculated by subtracting the right from the left.
In the manual system the folios are maintained in hard copies in folio racks
at the cashier’s cabin or back office. In an automated system the folio remains in the computer and a hard copy is printed out only at the time of guest check out. Each entry into the folio is called a posting . Each posting is recorded sequentially in the folio in the order of transactions on a given date.
When an account is created, it is assigned a folio with a starting balance
of zero.
A debit entry will increase the guest’s outstanding balance while a credit entry will decrease the outstanding balance.
At departure the outstanding balance has to be returned to zero by cash payment or by transfer to an approved credit card or to a direct billing account
Guest folio format :
POINTS TO REMEMBER WITH REGARD TO A FOLIO:
1. A folio is raised as soon as the guest checks in.
2. The initial outstanding balance {when it is opened} of the folio is zero
3. Details on a folio: Guest name, Room Number, date of arrival, date of departure,
Room rate, address, billing instructions. Each folio has a serial no. which will help
keep a control on folios for the purpose of audit.
4. The cashier is responsible for the guest folio till the guest departs.
Types of folios used in hotels:
• Individual guest account card/folio: To record transactions made by an individual
or independent guest with the hotel. Also called as guest folio
• Group folio/master folio: One folio for the whole group and this folio is required to
record all transactions made by the group{which are part of the package of the
group}
• Semi-Permanent or non-guest folios: In this folio the credit financial transactions
made by non-resident guests with the hotel are recorded. Also known as city
account card or non-resident guest account card.
• Employee folio: All the financial transactions {if any} made by the employees are
recorded
• Permanent/ companies/airlines folio: Separate folios are maintained for all
companies, agencies, organizations with whom the hotel has permanent billing
arrangements.
• Split Folios: Split folios are those when two guests wish to have separate accounts
though they share the same room. Room charges will feature on one folio for
convenience, other charges would reflect individually in split folios.
Another case of split folios is when a company executive would like to
maintain two separate accounts one that is charged to his/her company while
the other is to record his/her personal expenses.
Ledgers used at the front desk
A front office ledger is a collection of front office account folios
There are two main types used at the front desk
1} Guest ledger {Transient ledger/front office ledger and room ledger}
Guest ledger is the total set of all account folios of guests registered in the hotel
{in-house guest} hence any debit entry to the guest folio will not only increase the
guests balance but will also increase the net outstanding balance of the guest
ledger.
2} City ledger {Non-Guest Ledger}
City ledger records all accounts that do not belong to resident guests. At the
time of check out if the resident guests outstanding balance is not brought to zero ,
the same is transferred from the guest ledger to the city ledger.
At the time of account transfer, the responsibility for account collection shifts
from the front office to the accounting division (back office).
Accounts which are included in city ledger:
• Credit card payment accounts
• Direct billing accounts {guests’ whose bill will be settled by the company}
• Airlines
• Travel agencies
• Skipper’s account
• Bad cheques account {Bounced cheques of guests}
• Disputed bills account
• Retention charges account from DNA guests
Account aging:
Most of the city ledger accounts are settled within 30 days of billing which is
generally satisfactory. However there will be some which will take longer than 30
days to collect . The hotel should establish methods for tracking past due
accounts which may be based on the date the charges were incurred. This
practice of scheduled billings is normally referred to as account aging. At large
properties the accounting division monitors account aging while at smaller
properties the night auditor may assume this role. An account age analysis sheet
identifies which account receivables are 30, 60, 90 or more days old. Accounts
lesser than 30 days old are considered current. The accounts over 30 days are
considered overdue and the ones above 90 days are delinquent The front office
should maintain a list of accounts over 90 days due. Guests asking for
reservation on an overdue account may be asked to pay cash or by a valid
credit card until the account is considered current
Thursday, 22 September 2016
Question bank for 3rd
semester students(front office)
Q1. Write short
note on modern key control?
Q2 Explain the
function performed during Night auditing?
Q3 what is the
role of front office staff to ensure security and safety of guest?
Q4 Explain
different types of vouchers prepared by front office staff?
Q5 Explain credit
control measures adopted in hotels?
Q6 What is late check out? How can late
checkout be minimized?
Q7 French guest is
settling his bill using French currency and traveler’s cheque .Explain the checkout procedure with
relevant documentation for situation?
Q8 What is
the property management system? Explain Fidelio and Amadeus?
Q9 Explain the ECO with neat diagram?
Q10 Explain the
role of information technology in hospitality sector?
Q11 Draw a cash
sheet and explain its use in hotel?
Q12 List the
precautions to be taken while accepting currency notes, credit card and traveler
agent voucher?
Q13 What is P.M.S ? Write any three reports prepared by P.M.S.
Q14 As a front
office employee how will you deal with
a) Theft in the hotel room
b) Bomb threat
Q15 How does the
hotel provide safety and security to guest and guest valuable in current scenario?
Q16 what is folio?
Discuss types of folios used in hotels and draw a sample guest folio?
Q17 what are the
advantages of using PMS in hotel? Explain salient features of Fidelio and
Amadeus
Q18 Explain the
procedure of handling safe deposit lockers by front office. What procedure is
adopted for its allocation to the guest and its surrender by the guest?
Q19 Discuss the
guest cycle keeping in mind the accounting fundamentals?
Q20 Explain the
Visitors tabular ledger with the help of format?
Q21 what are the
various methods of guest account settlement?
Q22 Explain the various possible frauds in hotel
operations?
Q23 what are dos
and don’ts in case of fire how will you handle food poisoning of a guest?
Q24 what is credit
control and what are the measure to monitor the credit control systems in
hotels?
Q25 Differentiate
the following:-
a) Travelers cheque and ordinary cheque
b) Express checkout and self checkout
c) Discount and allowance
d) Key card and card key
e) VTL and VPO
f) Travelers cheque and demand draft
g) Credit settlement and cash settlement
h) Travelers cheque and travel agent voucher
Q26 write short
notes:-
a) VPO k
) city ledger
b) Charge privilege l)
master folio
c) Credit monitoring m)
voucher
d) Zero out n)
guest account
e) A/C Transfer o)
House limit
f) No pest out p)
discrepancy report
g) Late charge q)
cash bank
h) Due back r)
high risk account
i)
Account ageing s)
split folio
j)
Allowance t)
lock out
u)
pick up errors
Q27 Draw the
following formats:-
a) Paid out voucher e)
correction voucher
b) FO cash sheet f)
VTL
c) Guest folio g)
Allowance voucher
d) City ledger h)
Foreign currency encashment certificate
Q28 Translate into
French
a) I want to make reservation - Je veux réserver
b) May I help you?- Puis-je vous aider
c) Welcome to our hotel sir- bienvenue à notre hôtel monsieur
d) Kindly shift my room- de bien vouloir changer ma chambre
e) This is your key madam- ceci est votre madame clé
f) Good morning sir- Bonjour Monsieur
g) See you tomorrow- Rendez-vous demain
h) Have a nice day- Bonne journée
i)
Your baggage please - Vos bagages s'il vous plaît
j)
May I help you madam?- Puis-je vous aider madame?
k) Good evening - Bonsoir
l)
How are you?- Comment allez-vous?
m) I am sorry- je suis désolé
n) My pleasure welcome- Mon plaisir de bienvenue
o) Good bye- Au Revoir
p) Welcome- Bienvenue
q) Do you speak English- Parlez-vous anglais
r) I want to book a room- Je veux réserver une chambre
s)
What is your name?- Comment vous appelez-vous?
t)
speak louder please- parle plus fort je te prie
u) i want a single room with a double bed and attached bath- je veux une chambre simple avec un lit double et salle de
bain attenante
v)
I must have a quiet room- je dois avoir une chambre calme
w)
on what floor is the
room?- sur quel étage est la chambre?
x)
do you have cheaper room- avez-vous chambre moins chère
y)
will you please show me
your passport- montrerez-vous s'il vous plaît me votre passeport
z)
where are my newspapers- où sont mes journaux
FRONT OFFICE
GLOSSARY OF 3RD SEMESTER
1. Account – a form on which
financial data are accumulated and summarized.
2. Account balance- a summary
of an account in terms of its resulting monetary amount, specifically the
difference between the total debits and total credits to an account.
3. Account aging- a method
for tracking past due accounts according to the date the charges originated.
4. Allowance voucher- a voucher used to support
an account allowance.
5. Bucket check- the night
auditor’s check of room rate postings on guest folios against the housekeeping
department’s report of occupied rooms and the registration cards in the file.
This procedure helps ensure that rates have been posted for all occupied rooms
and helps reduce the occupancy errors caused when front desk agents do not
properly complete check in and checkout procedure.
6. Cash advance voucher- a voucher used to
support cash flow out of the hotel either directly to, or on behalf of a guest.
7. Cash bank- an amount of
money given to a cashier at the start of a work shift so that he or she can
handle the various transactions that occur. The cashier is responsible for this
cash bank and for all cash, checks and other negotiable items received during
the work shift.
8. Cash voucher- a voucher
used to support a cash payment transaction at the front desk.
9. Charge voucher - a voucher
used to support a charge purchase transaction that takes place somewhere other
than the front desk.
10. City ledger- the
collection of all non-guest accounts, including house accounts and unsettled
departed guest accounts.
11. Daily transcript- a
detailed report of all guest accounts that indicates each charge transactions
affecting a guest account for the day used as worksheet to detect possible
posting errors.
12. Delinquent account- a city
ledger account that has not been steeled within a reasonable collection period,
usually 90 days.
13. Correction voucher- a
voucher used to support the correction of a posting error that is rectified
before the close of business on the day the error was made.
14. Due back- a situation that
occurs when a cashier pays out more than he or she receives, the difference is
due back to the cashiers’ cash bank. In the front office, due back usually
occur when a cashier accepts so many checks and large bulls during a shift that
he or she cannot restore the initial banks at the end of the shift without
using the checks or large bills.
15. Employee folio- a folio
used to chart transactions on an account assigned to an employee with charge
purchase privileges at the hotel.
16. End of day or date roll-
an arbitrary stopping for the business day.
17. Floor limit- a limit
assigned to hotels by credit card companies indicating the maximum amount in
credit card charges the hotel is permitted to accept from a card member without
special authorization.
18. Folio- a statement of all
transactions affecting the balance of a single account.
19. Front office accounting
formula- previous balance + debits-credits= net outstanding balance.
20. Guest account- records the
financial transaction that occurs between a guest and the hotel.
21. Guest folio- a form (paper or electronic) used
to chart transaction on an account assigned to an individual person or guest
room.
22. Guest ledger- the set of
accounts for all guest currently registered at the hotel also call the front
office ledger transient ledger, or room’s ledger.
23. High balance account- an
account that has reached or exceeded a predetermined credit limit typically
identified by the night auditor, also called a high risk account.
24. House limit- accredit
limit established by the hotel.
25. In balance- a term describing the state of
accounts when the totals of debits amounts and credit amounts are equal.
26. Late charge- a charge posted to a guest account after the guest has settled the
account and departed the hotel.
27. Ledger- a grouping of
accounts.
28. Master folio- a folio used to chart
transactions on an account assigned t more than one person or guest room. Master
folios are usually reserved for group account.
29. Net cash receipts- the amount
of cash and checks in the cashier’s drawer, minus the amount of the initial
cash bank.
30. Non – guest account- an
account created to track the financial transaction o 1) a local business or
agency with charge privileges at the hotel 2) a group sponsoring a meeting at the
hotel or 3) a former guest with an outstanding account balance.
31. Non- guest folio- a folio
used to chart transaction on an account assigned to 1) a local business or
agency with charge privileges at the hotel 2) a group sponsoring a meeting at the
hotel or 3) a former guest with an outstanding account balance.
32. No show report- this report is for the benefit of the accounts receivable
department. The verification of who had a guaranteed reservation and did not
show up will assist the determining who needs to be billed.
33. Overages- an imbalance
that occurs when the total of cash and checks in a cash register drawer is
greater than the initial banks plus net cash receipts.
34. Out of balance- a term
describing the state of accounts when the totals of debits amounts and credit
amounts do not equal.
35. Paid in advance (PIA)- a guest who pays his or her room charges in
cash during registration. PIA guest are often denied in house credit.
36. Paid out- cash disbursed
by the hotel on behalf of a guest and charged to the guest’s account as a cash
advance.
37. Posting- the process of
recording transaction on a guest folio.
38. Room status report- a
report that allows front desk agents to identify vacant and ready rooms
typically prepared as part of the front office audit.
39. Room variance report- a
report listing any discrepancies between front desks and housekeeping room
status.
40. Self check out terminal-
an automated system usually located in the lobby, that allows the guest to
review his or her folio and settle the account using the credit or debit card
authorized at check in.
41. Shortage- an imbalance
that occurs when the total of cash and checks in a cash register drawer is less
than the initial bank plus net cash receipts.
42. Skipper- a guest who has
left a hotel and has intentionally not settled his or her account.
43. Supplement transcript- a
detailed report of all non guest accounts that indicates each charge
transaction that affected a non guest account that day, used as a worksheet to
detect posting errors.
44. System update- a fully
automate audit routine that accomplishes many of the same functions as a non-
computerized front office audit, daily system updates enables file
reorganization, system maintenance and report production, and provide and end
if day time frame.
45. Transfer voucher- a
voucher used to support a reduction in balance in one folio and an equal
increase in balance on another, used for transfers between guest accounts and
for transfer from guest accounts to non- guest accounts when they are settled
by the use of credit cards.
46. Trial balance- the process
of balancing front office accounts with transaction information by department
before the final balance is determined and the hotel day is closed.
47. Voucher- a document detailing a transaction to
be posted to a front office account, used to communicate information from a
point of sale to the front office.
48. Zeroing out- settling a
folio account balance in full as the guest checks out.
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