FRONT OFFICE ACCOUNTING

A front office accounting system is an essential process designed to monitor and chart the financial
transactions of guests and non-guest at the hotel during each stage of the guest cycle.

An effective guest accounting system includes tasks performed during each stage of the guest
cycle:

 During the pre-arrival stage of the guest cycle, a guest accounting system captures data
related to the form of guarantee for a reservation, and tracks pre- payment and advance
deposits.

 When the guest arrives at the hotel, a guest accounting system documents the application of
room rate and tax at registration.

 During occupancy, a guest accounting system is responsible for tracking guest charge
purchase.

 During guest checkout, a guest accounting system ensures payment for goods and services
provided.

 After guest check out- if a guest’s bill is not fully paid at checkout, the balance is transferred
from guest to non –guest records. When this occurs, collection becomes the responsibility of
the back office accounting division.

Note:
 The financial transactions of non-guests may also be processed within the parameters of
front office accounting.
 A hotel may allow transactions involving non-guests in order to promote the hotel to local
businesses; to track the unsettled bills of former guests; or to track transactions related to
conference business at the hotel .

So, the specific functions of a front office accounting system (FOAS) are to:
 Create and maintain an accurate accounting file for each guest or non-guest account
 Track financial transactions throughout the guest cycle
 Ensure internal control over cash and non-cash transaction
 Obtain settlement for all goods and services provided

The front office’s ability to monitor and chart guest and non-guest transaction will directly affect its
ability to collect outstanding balances.
Incomplete of inaccurate monitoring may lead to difficulties in settlement.
 ACCOUNTING FUNDAMENTALS

IMPORTANCE OF ACCOUNTING FOR FRONT OFFICE:

 Being familiar with company procedures and accounting needs and being able to identify
customer needs facilitates efficient work practices and promotes guest satisfaction.
 When proper, clear information is provided to guests, it prevents the occurrence of unpleasant
surprises to guests in the form of unexpected charges, etc. that are sure to disturb them and
cause unnecessary arguments and delays, especially at check out.
 Also, guest accounts must be updated regularly with charges and adjustments because this
impacts on company profits in the following ways:
 Accounts are kept up to date with the minimum of effort. This impact positively on
productivity and efficiency. Less time will be spent trying to find outstanding documents and
dealing with discrepancies.
 To minimize the chances of the guest departing before all charges have been posted. This
would save on costs of contacting the guest and losing out on payments especially with
foreign guests.
 To reassure guests that their accounts are being managed accurately and efficiently. A
satisfied guest implies repeat business.
 Security purposes: to prevent unauthorized access and the tampering of accounts, such as, the
creation of false revenue and fraudulent charges and adjustments to guest accounts.
 Inaccurate transactions: The presence of unauthorised persons in one’s work area increases the
risk of inaccurate transactions. Not only will the company suffer from account imbalances and
profit losses, but the guest may be upset at having incorrect charges etc. This affects guest
satisfaction, which in turn affects repeat business.
 Personal accountability: Front desk staffs that handle and process guest accounts are responsible
and accountable for computer transactions and for the filing and storage of account
documentation while on duty.
 All guest information is confidential: this includes account information, and unauthorised
persons must not be allowed access to such information.

Basic Accounting Terminology:

The design of a front office accounting system is unique to hotel operations. Both, terminology and
report formats, often differ from those of other accounting systems. A brief review of some of the
basic concepts of front office accounting follows.

1. ACCOUNT
An account is a form on which financial data are accumulated and summarized.
 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 summarized and the resulting monetary
amount is the account balance.
 All financial transactions that occur in a hotel affect some account.
 Front office accounts are record keeping devices to store information about guest and non-
guest financial transactions.

In its simplest written form, an account resembles the letter T:

Account Name

Charge Payment
For a front office account, charges are increases in the account balance and are entered on the left
side of the T, while payments are decreases in the account balance and are entered on the right side
of the T.
The account balance is the difference between the totals of the entries on the left side and the right
side of the T-account.

A journal form is typically used for front office accounting documents. In a non-automated or semi-
automated recordkeeping system, the journal form might look like this:

Description of Account Charge Payment Balance

In a journal, similar to a T-account, increases in the account balance are entered under charges, while
decreases in the account balance are entered under payments.
In a fully automated system, charges and payments may be listed in a single column with the
amounts of payment placed within parentheses(brackets) to indicate their effect (a decrease) on the
account balance or a positive amount depicting a debit charge and a negative amount indicating a
payment made by the guest- usually this can be seen in automated or computerised guest folios.

In accounting terminology, the left side of an account is called the debit side and the right side is
called the credit side.

In double entry bookkeeping, every transaction creates entries that affect at least two accounts.
The sum of the debit entries created by a transaction must equal the sum of the credit entries
created by that transaction. This fact forms the basis of the night audit.

There are three main types of accounts maintained by the front office cashier that record a hotel’s
transaction with three different types of customers:
a. Resident guest accounts
b. City accounts or non-guest accounts
c. Management accounts

a. Resident accounts or guest accounts:

Most of the accounts held by the front office cashier are the resident guest accounts, which
show the financial transactions with guests who have registered and who are currently staying at
the hotel.
 A guest account is a record of financial transactions, which occur between the in-house
guest and the hotel.
 Guest accounts are created when guests guarantee their reservations or at the time of
their registration.
 During occupancy, the front office records all transactions affecting the balance of a guest
account.
 The hotel usually receives payment for any outstanding guest account balance during the
settlement stage of the guest cycle, although circumstances may require partial or full
payment at other times during the guest cycle.
 Some of the resident guests may have their accommodation charges settled by their
company, while they settle incidentals themselves. In these situations, the resident guest
has to have two folios:
  The master folio or account for the room charges, which will be sent to the company for
settlement. A copy of this account is sent to the city ledger.
 The incidentals folio , which the guest will settle personally at check out. b.
City Accounts or non-guest accounts:
City accounts are records of financial transactions between the hotel and non-resident guests.
These accounts may also be called house accounts or city accounts. These could include
accounts held by:
 Local business people who are not resident in the hotel but who use the hotel facilities and
services for entertainment or business meetings agencies as a means of promotion.
 Guests who walk out of the hotel without settling the outstanding balance on their account
(skippers). Walk-outs are no longer residents so their account is transferred to the city
ledger, to either await eventual payment, or to be written off as a bad debt.
 Guests who have sent pre-payments to guarantee their bookings but have not yet arrived or
checked in- This amount is normally recorded in the accounts payable ledger till check in of
the guest.
 Non-guest accounts also include accounts of former guests, which were not satisfactorily
settled at the time of their departure- e.g. DNCO guests.
 Unlike guest accounts, non-guest accounts are normally billed on a monthly basis by the
hotel’s back office accounting division.

2. FOLIOS: Front office transactions are typically recorded on folios. A folio is a statement of all
transactions affecting the balance of a single account.
When an account is created, it is assigned a folio with a balance of zero. The front office records on
the folio all transactions which increase or decrease the balance of the account. At settlement, the
folio’s record of a guest account is returned to a zero balance by cash payment or by transfer to an
approved credit card or direct billing account (an account with a contract with a third party- TA or
Company, etc.).
Postings: The process of recording transactions on a guest folio is called posting. A transaction is
said to be posted when it has been recorded on the proper folio and a new balance has been
determined. When posting transactions, the front office may use handwritten folios (non-automated
system), machine –posted folios (semi-automated system), or computer based electronic folios (fully
automated system).

Types of Postings:
There are two basic types of transactions that are posted to a guest account: debit entries and credit
entries.
Debit entries increase the guest’s outstanding balance. Common debit items include:
 Room charges * restaurant/coffee shop/ bar
 Telephone * laundry
 Use of hotel facilities- health centre, business centre, transportation

Credit entries made in the guest folio reduce the guest’s outstanding balance and are usually
indicated by a negative amount (e.g. Rs. -300/-). Common credit entries include:
 Prepayments * Payments for part of the bill during stay
 Payments for final settlement * amendments/adjustments/allowances to the bill

Types of folios:
 Guest folio: an account assigned to an individual person or guestroom
 Master folio: an account assigned to more than one person or guestroom, usually reserved
for group accounts or a folio containing the charges that would be billed to
company/airline/Travel Agent, accounts.
 Incidentals folio: An incidentals folio is created in addition to the master folio and this
incidentals folio records all expenses (incidental charges) to be paid by the guest at the time
of checkout.
To sum it up, the master folio would commonly contain the charges of a room, etc. that are
to be paid by the group/company and the incidental folio of the same room would contain all
other charges ( incidentals) that are to be settled by the guest himself at departure.
 Non-guest or semi-permanent folio/ city folio: an account assigned to a non-guest business
or agency with hotel charge purchase privileges. Or a record of financial transactions between
a hotel and non-resident guests.
 Employee folio: an account assigned to an employee with charge purchase privileges, e.g. at
the coffee shop or pastry shop. This contains the credit transactions between a hotel and its
employees. The folio is created and maintained for employees to whom the hotel has
permitted credit/charge purchases. The amount is later collected from the employees or
deducted from their salaries.

Often, special circumstances may lead to unusual folio assignments. For example, a business guest
may request that his or her charges and payments be split between two folios; one to record
expenses to be paid by the business, and one to record personal expenses to be paid by the guest. In
this situation, two folios (split folio) may be created for one guest for the same room.

3. VOUCHERS: A voucher is a document detailing a transaction to be posted to a front office

accounts. Or it is a written statement or a documentary evidence of a financial transaction.

 A voucher is used to transfer transaction information from the source of the transaction
(POS) to the front office.
  A common use of vouchers is to notify the front office of guest charge purchases at the hotel’s
revenue outlets, which need posting. Several types of vouchers are used in front office accounting.

TYPES OF VOUCHERS:
1. Cash Voucher – A voucher used to support a cash payment transaction at the front desk.
2. Charge Voucher – A voucher used to support a charge purchase transaction that takes place somewhere other than
the front office.
3. Allowance Voucher – A voucher used to support an account allowance.
4. Cash Advance Voucher – A voucher used to support cash flow out of the hotel, either directly to or on behalf of the
guest.
5. Correction Voucher – A voucher used to support the correction of a posting error which is rectified before the close of
business on the day the error was made.
6. Credit Card Voucher – A form designated by the credit card company to be used for imprinting the credit card and
recording the amount charged.
7. Paid-Out Voucher – A voucher used to support the cash disbursed by the hotel on behalf of a guest.
8. Transfer Voucher – A voucher used to support a reduction in balance on one folio and an equal increase in balance on
another. Transfer vouchers are used for transfers between guest accounts and for transfers from guest accounts to non-
guest accounts when they are settled by credit cards.
9. Travel Agency Voucher – In travel agent guaranteed reservation, the travel agent forwards a voucher to the hotel as
proof of payment and guarantees that the prepaid amount will be sent to the hotel when the voucher is returned to the
travel agency for payment.

Distinguish between Voucher & Folio

Voucher Folio
1 It gives details of a single Refers to the statement of all transactions
transaction to be posted at the (debits & credits) affecting the balance of a
Front Office. single account.
For E.g. A florist or a gift shop This may include all non guest or guest
might not have provision of accounts.
posting a particular transaction
into a registered guest account.
They can send the voucher to
notify the FO of guest charge
privileges that need posting.
2 It gives all the information about This gives details of all the transactions
one transaction documented at under a particular account; contains all
the source of transaction (POS). transactions that increase or decrease the
balance.
3 The voucher accounts for a single Whereas a folio lists out all the postings in
posting. an account.
4 Created at POS Created and maintained at front office
cashier/accounting.

5 Types of Vouchers are cash Some of the types of Folios are Guest folios,
vouchers, charge vouchers, Master folios & Incidental folios, Non-guest
transfer vouchers, allowance or Semi Permanent Folios, Employee Folios.
vouchers & paid-out vouchers.
4. POINT OF SALE (POS): A point of sale is the time and location at which goods or
services are purchased.
Any hotel department that collects revenues for its goods of services is considered a revenue centre and
thus a point of sale. Large hotels typically support a wide variety of points of sale, including restaurants,
lounge, room service, valet service, parking garages, and telephone service. The front office accounting
system must be designed to ensure that all charge purchases at these points of sale, result in postings
made in guest folios.

The volume of goods and services purchased at scattered points of sale requires a complex internal
accounting system to ensure proper posting and documentation of sales activities.

4. LEDGER:

GUEST LEDGER:
 The guest ledger is the set of all guest accounts currently registered in the hotel.
 Guests who make appropriate credit arrangements at registration may be extended a privilege to
charge purchases to their individual accounts folio.
 Guests may also pay on their accounts at any time during occupancy.
 Guest financial transactions are recorded onto guest ledger to track receivable balances.
 The guest ledger may also be called the transient ledger, front office ledger, or rooms’ ledger.

CITY LEDGER:

 The city ledger, also called the non-guest ledger, is the collection of all non-guest accounts (house
accounts and unsettled departed guest accounts).
 If a guest account is not settled in full by cash payment at check- out, the guest’s folio balance is
transferred from the guest ledger to the city ledger for collection.
 At the time of transfer, accounts collection becomes the responsibility of the back office
accounting division.

Distinguish between Guest Ledger & City Ledger

Guest Ledger City Ledger

1 Is the set of guest accounts for Refers to the set of non guest accounts. For
registered guests or guests who e.g., if a guest account is not settled in full
have sent advance deposits. on check out, the balance is transferred to
the back office accounting division for
collection.
2 Corresponds to registered guests May or may not account to registered
or guests reserved for future guests alone
dates.
3 Records all financial transactions Contains Credit Card payment accounts,
of an in-house guest. Company accounts, direct billing accounts,
outstanding accounts of guests stayed
earlier and are due for collection.
4 Also referred to as transient It is also called Non-guest ledger.
ledger, front office ledger or
rooms ledger.
5 Maintained at front office Maintained by accounting division (back
office accounts)
Some accounting terms to remember-:
1. Accounting the process of collecting, recording, summarising, and analysing financial
transactions of a business.
2. Ledger A summary grouping of accounts
3. Guest Ledger a ledger containing the details of transactions between a hotel and a
resident guest or a set of registered hotel guest accounts
4. City Ledger Set of non-guest accounts
Transfer of non-settled accounts
Responsibility shifts from front office to accounting department
5. Folio A statement of all the transactions that take place between a hotel and its
guests.
6. Voucher- Details a transaction to be posted
7. Guest accounts The records of financial transactions that take place between a hotel and a
resident guest.
 FUNCTIONS OF THE FRONT OFFICE ACCOUNTING SYSTEM

I. CREATION AND MAINTENANCE OF ACCOUNTS

Front office operations typically involve the tracking of both guest and non-guest accounts within the
front office. The front office is responsible for the accurate and complete recording of all transactions
affecting the balance of guest ledger accounts and all transactions except collection for city ledger
accounts.

Guest folios are created during the reservation process or at registration.

 To prepare a folio for use, information from the guest’s reservation or registration record must be
transferred to the folio.
 If folios are pre-numbered for internal control purposes (as is common in non-automated and
semi-automated systems), the folio number is entered onto the guest’s registration card for cross-
indexing.
 In non- computerized systems, the printed guest folio cards (of resident guests) are stored in room
number sequence in a front desk folio tray or bucket.

In a fully automated system, guest information is transferred and folios are cross – indexed within the
computer system.
 A preliminary electronic folio may be created when a guest makes a reservation.
 At check-in, reservation data are verified and may be combined with assigned room number and
rate information to create and in-house electronic folio.
 For a walk- in guest, equivalent information is obtained and entered into the computer during the
registration process.
 Since an electronic folio is created within the computer system, guest information does not require
re-handling and the possibility for errors is greatly reduced.

CHARGE PRIVILEGES:
 To establish an in-house line of credit, the guest may be required to present an acceptable credit
card or a direct billing authorization as part of the registration process.
 Once a line of credit has been approved by the hotel, guests are able to make charge purchases.
 These transactions are communicated electronically or by vouchers from remote POS locations to
the front office for proper account posting.
 Guest who pay cash for accommodations at registration (known as Paid –In- Advance [PIA]) are
typically not extended charge purchase privileges.
 So, in a fully automated front office accounting system, PIA accounts may be set to a no-post
status.
 Point-of-sale terminals throughout the hotel will have access to this information, and revenue
outlet cashiers will know instantly if a guest has not been extended charge privileges.
 In non-automated and semi-automated properties, a physical PIA list is manually distributed to all
revenue centres. While this list has the same effect as the computer access list, it may not be as
useful or current resulting in mistakes.
 Local business or residents may also qualify for and establish house accounts and can then enjoy
charge privileges in the hotel.
 Charge purchases for house accounts, like those for guest accounts, move from the hotel’s
revenue centres to the front office for posting.
  Since all POS transactional vouchers are processed by the front office, a thorough audit and
comparison of guest and non-guest activities is possible.

Note:
A No Post status can be assigned to the guest in the following situations:
1. When a guest has been identified as a skipper.
2. When a guest has been identified as a scanty baggage guest.
3. When a guest informs that his mode of settlement at check out would be in cash- any form of
cash- foreign currency, travellers’ cheque.
4. In case of a walk in guests special attention is paid to his mode of settlement; if cash, then No Post
status is applied.
5. When a guest pays in advance at check in for his stay (PIA).

CREDIT MONITORING:
 The front office must monitor guest and non-guest accounts to ensure they remain within
acceptable credit limits.
 Typically, a line of credit is set for a guest who establishes acceptable credit worthiness during
the reservations or registration process.
 Guests who present an acceptable credit card at registration may be extended a line of credit
equal to the floor limit authorized by the issuing credit card company and non-guest accounts
while other approved credit arrangements are subject to limits established by the hotel called
house limits.

Policy for establishing in-house credit:

To minimize bad debts it is important to establish clear guidelines for operation of in-house credit
provisions. These guidelines should cover:

a. Who is going to be provided with credit?

b. What references or security is required before extending credit facilities?
c. What are the credit limits for individual debtors and within what time span will they be
allowed to pay?
d. What processes are going to be undertaken in the event of default?
e. Establishment of a credit sales journal, debtors’ contract accounts should be maintained
up-to-date and regularly reconciled by preparing and aged listing for further review and
action.
 As the guest approaches his credit limit, management may need to be notified, according to hotel
policy. Such accounts are called high risk or high balance accounts.
 Management may choose to request additional credit authorization from the credit card
company, or request a partial payment from the guest to reduce the accounts balance.
 The night auditor is primarily responsible for identifying accounts which have reached or
exceeded predetermined credit limits.
 The front office may deny charge purchase privileges to guest with high balance accounts until
the situation is resolved.

ACCOUNT MAINTENANCE: a Folio is used to record transactions that affect a front office accounts
balance. Since guests may inquire about their outstanding accounts balance or check out of the hotel with
little or no advance notice, it is important that guest folios be accurate, current, and properly filed.
Transaction postings conform to a basic front office accounting formula. The formula is:
 Previous balance + Debit - Credit = Net Outstanding Balance

PB + DR - CR = NOB

Please remember that debits increase the (outstanding) balance of an account, while credits decrease
the (outstanding) balance.

RECORDKEEPING SYSTEMS:
The format of the information recorded on a folio may differ according to the front office recordkeeping
system.

A) NON-AUTOMATED RECORDKEEPING SYSTEM: Guest folios in a non-automated system contains a

series of columns to list debits and credits accumulated by a guest during occupancy. At the end of the
business day, each column is totalled and the ending balance is carried forward as the opening folio
balance for the following day (VTL).

i. VISITORS TABULAR LEDGER:

 Also called the VTL or tab or tab sheet, it is more popular in smaller hotels.
 In larger hotels, the work is too time-consuming and labour-intensive.
 It is a ledger in tabular form.
 It is a loose-leaf sheet recording daily transactions of hotel guests.
 Checks, bills or vouchers from different Points of Sale (POS) are delivered to the FO cashier,
preferably as they occur, through pneumatic tubes or chutes or personally by the POS
cashier. These bills are entered, as they are received, in the appropriate columns.
 These may be sorted according to departments and room numbers and entered.
 The VTL has various columns for different charges and contains details of the guest and
room number, number of guests, room rate, accommodation charges, breakfast, lunch,
beverages, alcohol, phone-local and trunk, VPOs (visitor paid outs), credit (advance
payments, allowances, discounts), totals carried forward and brought forward for the next
day.
 The common form is to have vertical columns for room numbers and guest names and
horizontal rows for the various charge heads or expense heads. The vertical totals give the
amount to be received from the guest. The vouchers should be posted as they come to the
FO cashier and the posted vouchers should be cancelled to avoid duplication or
overcharging.
 When a guest checks in or arrives, a new column is started, so room numbers may not be
in serial order. You also might have two columns with the same room number if a recently
vacated room is let again. The room charges are entered as the account is opened and the
other charges are entered as they occur.
 When a guest checks out, he settles the bill. The cash row records any receipts from the
guest- cash, credit card, cheque, and travellers’ cheque, etc. The city ledger row will
indicate the amounts to be collected not from the guest but another source- travel agent,
tour operator, credit card company, etc.
 After the bill is settled a line should be drawn through the relevant room number column
to avoid any further accidental entries in the wrong room number accounts.
 If a guest continues to stay over to the next day, the total charges for today will be carried
forward to the VTL for tomorrow. This amount should be the same as the balance brought
forward for the following day. In the next day’s VTL the room numbers are arranged
 serially.
 The VTL of each day should be “balanced’, i.e. add all the vertical columns and horizontal
rows. These totals should be the same. This is normally done in quiet periods and should
ideally be done after 12 pm noon ( check in- check out time) but is usually done in the night
shift.
 The guest bill prepared for presenting to the guest should contain the same charge
columns as the VTL. For correct transfer of the VTL entries to the guest bill, the latter is
placed alongside the VTL and the amounts transferred, totalled and presented to the guest
for payment.

Ii. GUEST BILL / WEEKLY BILL (GWB): In the conventional system a weekly bill is prepared from the
 VTL for 7 days and is called the 3-day bill or 7- day bill, always used for long stay
guests.
 This is prepared if the guest stays for more than 7 days and a continuation bill may
be prepared for the remaining days.
 It is presented at the end of the 7th day, payable on presentation or after 3 days of
guest stay.
 It is folded and addressed to the guest by the reception and kept in the mail and key
rack to deliver to the guest.

B) SEMI-AUTOMATED RECORDKEEPING SYSTEM: guest transactions appear sequentially on a machine-

posted folio. For each transaction, data recorded includes the date, department, amount of transaction,
and new balance of account. The folio’s outstanding balance is the amount the guest owes the hotel, or
the amount the hotel owes the guest in the event of a credit balance at settlement. The column labelled
previous balance pick-up provides an audit trail within the posting machine framework.

ELECTRONIC BILLING MACHINES (EBMs):

Larger hotels offering a variety of services find the VTL very cumbersome and time consuming and
now depend on the EBM or NCR ( National Cash Register) or of late, the computers.
The electronic billing machines (EBM) handle the same data as the VTL but it stores the various charges in
‘registers’ (memories) and prints out the totals as required and maintains a daily summary total.
Therefore, the guest bill remains much the same, only showing the totals for various charges or
allowances. Details may be checked in the audit roll being processed simultaneously. This method
eliminates duplication of work as is seen in the VTL; the entries have to be recorded twice - once on the
VTL and once again on the guest bill.

ADVANTAGES:
1. All bill entries are entered in the memory, so the bill and ledger totals agree.
2. All entries or calculations are automatic so bills are totalled correctly.
3. Bills are printed and so are legible.
4. Charge vouchers are automatically cancelled upon entering so no mistaken duplication.
5. Control is easier as machine is “in balance’, simplifying accounting and control.

Features:
a. An EBM creates a guest bill called the guest folio.
b. This is the bill in which all cash and credit transactions of the guest are recorded.
c. It is opened as soon as a guest registers in the hotel and submits a completed and signed GRC-
guest registration card.
 d. A copy of this is passed to the FO cashier who opens a new guest folio and clips the GRC to it.
Details of the GRC - room number, guest name, rate, date of arrival, date of departure, number of
guests, billing instructions, are noted on the top of the folio for ease of finding and filling in the
folio bucket.
e. The opening telephone meter reading is also noted.
f. Once the formalities are completed, the folio is placed in room number-wise arranged pigeonholes
at the cashier’s counter or folio buckets.
g. All signed guest bills from various POS are sorted by the FO cashier and entered into this bill
h. These folios are normally in duplicate- one for the guest and one for hotel records.

The NCR used nowadays has the following visible parts:

1. Amount keys 2. Room number keys
3. Control keys for printing department names or heads of revenue
4. Identification keys- room, bar, restaurant, laundry, local calls, trunk calls, etc.
5. Debit balance key 6. Credit balance key
7. Debit pick up key 8. Credits pick up key
9. Plus-minus keys 10. Allowance key
11. Credit transfer key 12. Debit transfer key
13. Paid in full key 14. Paid key
15. Total key 16. Sub total and miscellaneous key
17. Date change key 18. Audit roll key
19. Left printer 20. Right printer

PROCEDURE:
1. When a guest checks in, the FO cashier takes a new folio and types the details from the GRC on to it.
2. The folio is placed on the machine’s platform at the correct line where room charges have to be
printed, by sliding the carriage. The opening balance has to be printed which is zero unless an
advance deposit has been made.
3. Take out the folio and place in the appropriate pigeonhole.

POSTING of CHARGES:
4. Collect bills, checks, and vouchers from POS cashiers.
5. Arrange according to departments- room service, laundry, etc.
6. Arrange these according to room numbers in terms of floors- 101,102, 202, 202, etc.
7. Take all bills for a particular floor and room number on that floor.
8. Compare guest signature on vouchers with that on GRC.
9. Set line-finding carriage to the line where charge is to be posted.
10. Insert voucher on the upper print with front page facing downwards.
1. Insert folio into printing table- face up.
12. Set up room number on room keys by pressing them.
13. Press particular department keys- coffee shop, etc.
14. Record amount of guest charge on amount key by pressing the correct keys.
15. Press control total key.
16. Take out folio, move control key to clear.
17. Attach voucher to folio and return to pigeonhole

C) FULLY AUTOMATED RECORDKEEPING SYSTEM: transactions may be automatically posted to an

electronic folio. When a printed copy of the folio is needed, debits and credits may appear in single
column, with payments distinguished by a minus sign, or in the traditional multiple column formats.

II. FUNCTION OF F.O.A IS TRACKING TRANSACTIONS:

The occurrence of a transaction initiates activity within the front office accounting system. Nothing
happens without a transaction. For this reason, the front office accounting system is called a transactional
accounting system. Both the nature of the transaction and its monetary value are required for proper
posting procedures.
Charge purchase transactions must be properly documented (typically on vouchers) for appropriate
postings to be made.
These must be promptly communicated to the front office for posting in the guest folios.
The night audit verifies all transactional data to ensure that the hotel collects accounts receivable
balances for all goods and services provided.
A transaction can be one of several types:
a. Cash payment
b. Charge purchase
c. Account correction
d. Account allowance
e. Account transfer
f. Cash advance

Each type of transaction has a different effect on the front office accounting system. Each transaction
type may be communicated to the front office through the use of a different type of voucher, which
simplifies auditing procedures.
a. Cash payment:
 Cash payments made by guests at the front desk are posted as credits to a guest or non-guest
account, and decrease the balance of the account.
 The front office may use a cash voucher to support such transactions.
 Only cash payment transactions which take place at the front desk create entries on an
account folio.
 Cash payments to settle an account or pre-pay for accommodation also affect front office
accounts balances.
 A guest who registers and pays cash in advance for accommodations may be provided a copy
of his or her folio as proof of payment.
 When cash is paid for goods or services at a location other than the front desk, no entry
appears on the account folio.
The “account” for this transaction is created, increased, settled and closed at the point of sale,
thereby eliminating the need for front office documentation or posting.

b. Charge purchase:
 Charge purchases represent deferred payment transactions.
 In a deferred payment transaction, the buyer receives goods and services but does not pay for
them at the time they are provided.
 A charge purchase transaction increases the outstanding balance of a folio.
 If the transaction occurs somewhere other than the front desk, it must be communicated to
the front desk for proper folio posting.
 These transactions are supported by means of a charge voucher which is used for proper folio
 posting.
 For example when a resident guest dines in one of the restaurants in the hotel he signs a
check/bill {charge voucher} indicating that he will pay the amount later. The voucher is made
in duplicate and one copy is sent to the front desk folio posting.
 If the Point-of-sale terminals are linked to the front desk systems, the staff at the point of sale
can query the front office system for guest verification, as well as post charges directly to the
guest account.

c. Account Correction:
 An account correction resolves a posting error on a folio which is rectified on the same day the
error is made, before the close of business.
 An account correction can either increase or decrease an account balance depending on the
nature of the error.
 For instance, suppose a front desk agent mistakenly applied a lower room rate than was
appropriate for a particular guest room, it would be necessary to adjust the balance of the
account.
 In this instance, the account correction would increase the guest’s folio balance.
 If a higher room rate has been wrongly posted, then the account correction would decrease
the account’s balance.
 A correction voucher is used to document this type of transaction.

d. Account Allowance:
An account allowance involves two types of transactions.
1. One type of allowance is a decrease in a folio balance for such purposes as compensation for
poor services and rebates for coupon discounts.
 The use of such an allowance voucher requires approval/ authorisation by management.
 So, guests claiming allowance but who do not have authorization are referred to the
lobby manager.
 Ask guests eligible for an allowance for proof of identification.
 Fill in details into allowance voucher.
 The voucher is signed by the lobby manger and guest and by cashier.
 Hand over the original copy to the guest.
 The second copy is attached to the cashier’s report and filled in the paid column.
 The third copy is maintained in the Allowance voucher book.

2. Another type of allowance is used to correct a posting error detected after the close of
business or the night audit.
 The error will thus be separately entered into the accounting records of the various
departments.
 This type of allowance also needs to be authorised.
 An account allowance is documented by the use of an allowance voucher.

e. Account Transfer:
 When one guest offers to pay a charge for another guest, the charge must be transferred from
one account to another account.
 The reduction in balance on the originating folio and the increase in balance on the destination
folio will be supported by a transfer voucher.
 An account transfer may also occur when a departing guest uses a credit card to settle his or
her account.
 The guest’s account balance is transferred from a guest account to a non-guest account (credit
card/ company/travel agent account) using a transfer voucher.
f. Cash advance/ Visitors Paid Out (VPO):
 Cash advances differ from other transactions in that they reflect cash flow out of the hotel,
either directly to or on behalf of a guest.
 Cash advance transactions are similar to debit transactions and increase a folio balance.
 Cash advances are supported by cash advance vouchers.
 Cash disbursed by the hotel on behalf of the guest and charged to the guest’s account as a
cash advance is typically called a paid-out.
 Such expenses are usually taxi charges, porter charges, emergency medical expenses, ticket
confirmation charges, floral delivery etc.
 For example, a guest who orders a floral delivery, may request that the front desk agent
accept the order and pay for the flowers.
 This payment for flowers is a cash advance on the guest’s behalf.
 The front office pays for the delivery on the assumption that the guest will reimburse the
hotel.
 Hotel policy will dictate how cash advances are to be handled.
 Usually, prior confirmation needs to be taken from the guest before any payment is made
on his behalf.
 These payments are made from the cash bank received at the beginning of the shift by the
cashier.
 Paid outs are only made in local currency.
Procedure for handling paid-outs:
 Confirm the name, room no. and identity of the guest
 Find out details for which the paid-out is being made
 Fill in details into the paid-out voucher. Every voucher is numbered to maintain
control.
 Get voucher authorized by the lobby manager.
 The guest signs in acknowledgement.
 Make the payment in cash to the guest or service provider- taxi or florist, etc.
 Fill in the details in the paid-out column of the front office cashier’s report.

Transaction Effect on Guest Account Voucher Used

Cash Payment - Posted as credits ; Cash Voucher

Decrease the net outstanding
balance (NOB) of guest account
Charge Purchase Posted as debits ; Charge Voucher
Increase the NOB of guest
account.
Account Correction Resolves posting errors before Correction Voucher
closing.
May increase or decrease
NOB.
Account Allowance Posted as credits for errors after Allowance Voucher
closing or compensation for
 poor service.
Decrease NOB.
Account Transfer For transfer from a guest Transfer Voucher
account to another guest
account or to city ledgers.
Cash Advance Voucher
Cash Advance Posted as debits; or
Increase the NOB Visitors Paid Out

Front office cash sheet: the front office is responsible for a variety of cash transaction, which may affect
both guest and non-guest accounts .proper cash handling procedures and controls must be established,
implemented, and enforced.
Most operations require front office cashiers to complete a front office cash sheet.
 The cash sheet provides separate columns to record transaction affecting guest accounts,
transaction affecting non-guest accounts, and miscellaneous transactions.
 Front office policy also requires the completion of a cash voucher to document each cash
transaction affecting a front office account.
 Money/cash collected from a departing guest during settlement is the most common
entry on a front office cash sheet.
 When guest pay on their accounts, the cashier typically records the amount paid, the room
number, and the folio number.
 If a guest pays for his or her accommodation in advance , the front desk agent records this
payment to offset subsequent room and tax charges and to render a zero folio balance.
 The front office cash sheet also provides space for itemization of cash disbursements or
paid –outs.
 When a guest charges a room service purchase to his account, for example, it may include
the server’s tip in that charge. If the front office cashier pays the server’s tip, it is recorded
on the front office cash sheet as a paid out transaction similar action is followed if the front
 office accepts and pays for collect mail, telegrams, or other items.
 Payment for cash advances / VPOs is generally collected from guest at checkout as part of
folio settlement.

B} Front office cashier’s report

Each cashier, whether at the front desk or any other outlet such as bar, restaurant, or any other
point of sale, makes a daily cash report. These reports are audited and the total cash received is
combined in a daily deposit. The funds are audited by the night auditor during the night.

Cash banks/ Imprest/ Cash Float:

 A second set of front office accounting control procedure involves the use of cashier banks.
A bank is an amount of cash assigned to a cashier so that he can handle the various
transactions that occur during a particular work shift.
 Control procedures typically require that cashier sign for their banks and that a limited
number of people have access to any one bank.
 At the end of a work shift, each front office cashier is responsible for depositing all cash,
checks, and other negotiable instrument received during the work shift.
 At shift end, after removing the initial bank, the cashier usually places the cash and check he
or she has received in a specially designed cash voucher or cash deposit envelope.
 The cashier itemizes the contents of the deposit envelope and the cashier’s net cash receipts
should be noted on the envelope as overages, shortages, or due backs.

A due back/ due bank occurs when a cashier pays out more than he or she receives; in other
words, there is not enough cash in the drawer to restore the initial bank. This is unusual in the
front office. However, a special kind of due back may occur in the front office if a cashier accepts
many checks and large bills during a shift, such that he cannot restore the initial bank without including
the checks or large bills.
Checks and large bills are not very useful for processing transactions, and are usually deposited
with other receipts.
Consequently, the deposit is greater than the cashier’s net cash receipts, with the excess due back
to the cashier’s bank.
Front office due backs are normally replaced with small bills and coins before the cashier’s next
work shift, restoring the bank to its full and correct amount.
Due backs do not reflect positively or negatively on the cashier’s job performance, and may occur
when the cashier is in or out of balance.
Note: A Due Back is also called a due bank in some books.

Some Important Accounting terms:

1. Advance Deposit- Pre-payment by guest to guarantee reservation

2. Correction Voucher- Supports a correction on the Same Day as the error.
3. Allowance Voucher- Supports a correction After the close of business, i.e. after the night audit
Requires management approval
4. Transfer Voucher- Reduces one account and increases another
5. Paid-out Voucher- Accounts for cash advances made to the guest on the guest’s folio
6. Cash Voucher - Supports the posting of a credit to a guest folio, e.g. when a guest pays
cash deposit at check in.
7. Charge Voucher- Supports the posting of a debit to a guest folio, e.g. when a guest enjoys a
cup of coffee in the coffee shop and signs the POS voucher that should
now be sent to front office for posting in the guest folio.
8. Cash bank - A bank is an amount of cash assigned to a cashier so that he can handle
the various cash transactions that occur during a particular work shift.