FRONT OFFICE

“FRONT OFFICE
ACCOUNTING”

COMPILED BY: PRIYADARSHINI SETH

LECTURER

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING 1
 SCOPE
Front office accounts fundamentals
Creation and maintenance of accounts
Record keeping systems
Tracking transactions
Internal control procedure

IHM LUCKNOW SEMESTER III/IV

8/16/2017
MODULE: FRONT OFFICE ACCOUNTING
BY: P.SETH 2
 OBJECTIVE

At the end of this session you will

understand:
Front office accounting fundamentals

IHM LUCKNOW SEMESTER III/IV

8/16/2017
MODULE: FRONT OFFICE ACCOUNTING
BY: P.SETH 3
 FRONT OFFICE ACCOUNTING
FUNDAMENTALS
List of accounting terminologies used in front
office accounting:
Accounts
Folios
Vouchers
Point of sale
Ledgers

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 4
ACCOUNT….
• Form in which accounting data is accumulated
summarized & balanced
• All accounts have two entries debit(charges) and
credits(payments)
• In a T-account debit entries are on the left hand
side and credit entries are on the right hand side
• There are two major type of accounts:
– Guest accounts
– Non-guest account
IHM LUCKNOW SEMESTER III/IV
8/16/2017
MODULE: FRONT OFFICE ACCOUNTING
BY: P.SETH 5
 FOLIO….
• Statement of all transaction (DR/CR) affecting
the balance of a single account
• Starting balance of folio is zero & at checkout
it should again come back to zero after
payment
• Process of recording transaction on foilo-
posting
• All folios have a unique serial no. for proper
record maintenance and storage
IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017
FRONT OFFICE ACCOUNTING BY: P.SETH 6
 TYPES OF FOLIO (Cont.)
I. Guest folio
II. Non-guest folio/ semi permanent folio
III. Employee folio
IV. Split folio
V. Incidental folio
VI. Master folio
VII.Special folio

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 7
 VOUCHERS……
• Depicts the details of transaction information
to posted to a front office account
• May be manually sent or electronically
transferred
• Typical vouchers used in front office
accounting:
 Cash voucher
•Paid out voucher
 Credit voucher
•Correction voucher
 Charge voucher
•Allowance voucher
 Transfer voucher
IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017
FRONT OFFICE ACCOUNTING BY: P.SETH 8
POINT OF SALE
• Physical locations at which goods and services are
purchased
• Any hotel department or area that collects revenue is a
point of sale
• Large hotels support many points of sale: restaurants
,lounges, room service, dry cleaning, valet, parking
garage, telephone service, retail shops etc.
• Some hotels have guest operated devices that function
as self service points of sale like in room movie
systems, internet access devices, in room vending
machines
IHM LUCKNOW SEMESTER III/IV
8/16/2017
MODULE: FRONT OFFICE ACCOUNTING
BY: P.SETH 9
 LEDGERS
• Summary grouping of accounts
• Ledgers are of two types:
– Guest ledger
• Holds the accounts of registered guest
• Holds the advance deposits of future guest
• Front office department responsible for collection
• Also called as transient ledger

– City ledger/ Non-guest ledger

• Hold the guest accounts not paid in full at the time of check
out
• Accounts department responsible for collection

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 10
 Q1. Why is it important to maintain a proper
accounting system?
Q2. Define : ledger, folio, POS
Q3. Differentiate between allowance voucher
and correction voucher
Q4. What is a miscellaneous charge voucher?

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 11
IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017
FRONT OFFICE ACCOUNTING BY: P.SETH 12
 FRONT OFFICE ACCOUNTING
CREATION AND MAINTENANCE OF
ACCOUNTS

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 13
 OBJECTIVE
At the end of the session you will understand
• Process of creating and maintain front office
accounts
• Record keeping systems

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 14
 CREATION AND MAINTENANCE OF ACCOUNTS
• Accurately and completely recording all
transactions that affect guest & non-guest ledger
is the responsibility of front office staff.
• Guest folios are created during reservation or
registration process
• Folios are placed on cashiers desk in folio tray/
posting tray/ folio well/ folio bucket
• In fully automated system guest information is
automatically transferred from the
reservation/registration record to an electronic
folio
IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017
FRONT OFFICE ACCOUNTING BY: P.SETH 15
 Continued…..
• Electronic folios are interferral with front
office PMS

• At check-in reservation data is verified and

combined with room rate and guest room no.
information and electronic folio is generated

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 16
 FRONT OFFICE ACCOUNTING FORMULA
Previous balance plus debits minus credits
equals to Net outstanding balance

NOB= PB + DR ‒ CR

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 17
 RECORD KEEPING SYSTEMS
• Non-automated systems

• Semi-automated systems

• Fully automated systems

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 18
 NON-AUTOMATED SYSTEM
• Manual system of accounts
• Records and files maintained by hand
• Numerous data handling and re-handling
procedure
• No machine assistance
• Subject to discrepancies
• Used only in very small hotels

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 19
 SEMI AUTOMATED SYSTEM
• Guest transactions printed on a machine
posted folio
• Cashier need to calculate net outstanding
balance
• Previous balance is to be re-entered every
time a transaction is recorded

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 20
 AUTOMATED SYSTEM
• Guest charges automatically posted to an
electronic folio
• Debit and credit transaction appear in a single
column distinguished by a ­ / + sign
• Maintains current balance all the time
• More accurate
• Less discrepancies

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 21
 From the following information calculate the NOB of Mr. Jones ,
using appropriate formula:

Restaurant charges: $ 14.25

Guest room and taxes: $60.00
Long distance call: $6.38
Miscellaneous credit: $18.38
Cash payment from the guest: $62.25

Ans: $0.00

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 22
IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017
FRONT OFFICE ACCOUNTING BY: P.SETH 23
 FRONT OFFICE ACCOUNTING
TRACKING TRANSACTION

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 24
 OBJECTIVE

At the end of the session you will

understand
Tracking of front office transaction

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 25
 TRACKING TRANSACTION
In hotels transaction might have a form of :
• Cash payment
• Charge purchase
• Account correction
• Account allowance
• Account transfer
• Cash advance
IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017
FRONT OFFICE ACCOUNTING BY: P.SETH 26
 CASH PAYMENT
• Made at front desk
• Reduces net outstanding balance
• Support documentation :- cash voucher
• Cash transaction at any other POS do not
affect front office account folio

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 27
 CHARGE PURCHASE
• Also referred as deferred payment transaction
• Increase NOB
• Good and service received but payment is
done later on
• Support documentation- charge voucher
• All charge purchase transaction at all POS are
to be posted in front office accounts

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 28
 ACCOUNT CORRECTION
• Resolves a posting error on folio detected
before end of the day
• Support documentation- correction voucher
• May either increase or decrease the NOB

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 29
 ACCOUNT ALLOWANCE
• Allowance occurs in two ways :
• Either as compensation of poor service or
rebates of coupons
• Or to correct a posting error afeter the end of
the day
• Support documantation: allowance voucher
• Require a management approval

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 30
 ACCOUNT TRANSFER

• Involves two different guest accounts

• Subsequent effect on both the accounts
• Support documentation- transfer voucher
• Reduce the balance in originating foilio
• Increase the balance in destination folio

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 31
 CASH ADVANCE
• Reflects cash flow out of the hotel’s resources
• Directly or on behalf of the guest
• These are debit transaction as they increase
NOB
• Cash disbursed on behalf of the guest – PAID
OUT
• Cash disbursed on behalf of the department-
PETTY CASH
IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017
FRONT OFFICE ACCOUNTING BY: P.SETH 32
 (CONT.)
• Paid out
– Reduces amount iof cash held in front office
cashier’s drawer
– Requires manager’s approval
• Petty cash
– Reduces the cash bank

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 33
 Q1. Which voucher supports a deffered
payment transaction?
Q2. What kind of transaction occurs when error
is detected before the end of the day?
Q3. What are the various types of transaction
that occurs in a hotel?

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 34
IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017
FRONT OFFICE ACCOUNTING BY: P.SETH 35
 OBJECTICVE

At the end of the session you will understand:

Phases of a transaction
Internal control function
Cash bank
Settlement of accounts

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 36
 PHASES OF A TRANSACTION
Transactional analysis or Tracking
Transaction
Support Documentation

Account Posting & Maintenance

Account Auditing & Internal Control

Settlement of Account Balance

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017
FRONT OFFICE ACCOUNTING BY: P.SETH 37
 INTERNAL CONTROL FUNCTION
The main purpose of the internal control is:

Tracking transaction documentation

Verify account entries and balances
To identify vulnerabilities in accounting system
the key word to internal control is AUDITING

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 38
 CASH BANK
• Amount of cash assigned to cashier to start his
day
• Bank limit- starting amount of the bank should
have at the start of the day
• Cashier sign the bank at the beginning of the
shift
• People who sign for bank have an access to
the bank
IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017
FRONT OFFICE ACCOUNTING BY: P.SETH 39
 Cont.
• At the end of the shift, cashier deposits all cash
checks and other negotiable instruments into
hotel safe to the main accountant in a specially
designed envelope
• After deposit the bank should come to original
bank limit
• The discrepancies in cash bank are recorded as:
– Overage
– Shortage
– Due backs
IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017
FRONT OFFICE ACCOUNTING BY: P.SETH 40
 Cont.
• Net Cash reciepts: the amount of cash ,
checks and other negotiable items in the
cashiers drawer, minus the amount of initial
cash bank plus any paid outs
• Overage: after the initial cash bank is
removed total of cash , checks , gift
certificates and paid outs is greater than the
net cash receipts

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 41
 Cont.
• Shortage: a shortage occurs when the total
contents of the cash drawer is less than the
NCR

• Due backs: occurs when the cashier is not able

to restore the initial cash bank (when the
cashier pays out more than what he receives)
• Due backs are not unusual in front office
IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017
FRONT OFFICE ACCOUNTING BY: P.SETH 42
 SETTLEMENT OF ACCOUNT
• The collection of payment for outstanding
account balance
• Bring account balance to zero
• All guest accounts should be zeroed out at
check out
• Non guest account may take 15-30 days to
settle as per policy of hotel

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017

FRONT OFFICE ACCOUNTING BY: P.SETH 43
 Q1. What are the various phases of a
transaction?

Q2. Differentiate between overage and shortage

Q3. What is due back?

Q4. What is NCR?

IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017
FRONT OFFICE ACCOUNTING BY: P.SETH 44
IHM LUCKNOW SEMESTER III/IV MODULE: 8/16/2017
FRONT OFFICE ACCOUNTING BY: P.SETH 45