Accounting for Hotels (With

Accounting Entries)
 INTRODUCTION

• A hotel may have different provisions for serving of refreshments or for

serving of lunches and dinners including the arrangement of bar.

• Sometimes, they may also have separate sections for catering at different
places on different social occasions.

• For this purpose, separate accounts for purchases of various types of items
and sales of various types of items must be maintained in order to ascertain
the correct position which, in other words, will help them in maintaining
accounts properly.
An Analytical Purchase Book and a Cash Book (Payment
side) may be maintained for recording purchase and expenses
with different columns for:

• Wines and Minerals,

• Groceries and Provisions,
• Cutlery, Glass, Plate etc.,
• Bedding and Linens,
• Establishments,
• Furniture and Fixtures etc.
• (A ledger column must also be made in Cash Book for
recording the disbursement made for visitors.)

• On the contrary, the Sales Book and the receipt side of

the Cash Book must have similar analysis columns for:
Breakfast, Lunches and Dinners; Bar, Cigarettes and
Cigars etc. Carriages (if any) etc.
 Fixation of Room Rate

• While ascertaining room rate the following points

should carefully be noted:

• (a) Availability of rooms in the hotel;

• (b) Expected rate of return of investments;
 Fixation of Room Rate

• c) Expenditure (Both Capital and Revenue);

• (d) Location of the hotel;
• (e) Location of the particular room;
• (f) Availability of various facilities;
• g) Occupancy Rate, etc.
 Method of Calculation:

• For ascertain room rate, normally the total estimated

expenditure (revenue) plus estimated rate of return on
investment is divided by the number of rooms which are
available for letting out purposes.

• It may be mentioned here that the charges for Single Room,

Double Room, South-facing Room will be quite different
than the other.
Room Occupancy Rate is calculated as:
 Charging Room Rate:

• Usually for a 24-hour stay one day’s charge is taken, i.e., the occupant is
allowed to stay for 24 hours from the time of arrival to the time of
departure.

• The occupant is to pay one day’s charge even if he stays for less than 24
hours. It is interesting to note that check-out time is followed in some hotels
which is usually fixed at 12 noon.

• For this, full charge is to be paid by the occupant from the time of occupying
the room to the check-out time which usually is less than 24 hours.
 Charging Room Rate:
• For example, X occupied a room in a hotel at 7.00 a.m. in the morning
on Monday where check out time was fixed at 12.00 a.m.

• He left the hotel on. Tuesday at 4.00 p.m. He should pay 3 days
charges (i.e., from 7.00 a.m. to 12 a.m. on Monday, + 12 noon of
Monday to 12 noon of Tuesday +12 noon of Tuesday to 4 p.m. of
Tuesday).
 Sales Tax and Hotel Expenditure Tax:

• Usually sales taxes are paid by the occupant on various

items at the rates framed by the State Government and the
same is deposited at regular intervals to the State
Government. Similarly, Hotel Expenditure Tax (HET) is
levied by some luxury hotels- on the bills (including Sales
Tax) @ 10% which is to be submitted to Central
Government.
 Illustration 1:

• A five-star hotel has 660 rooms in all, out of which 52 rooms

are used for operational purposes and 8 rooms are used by
the departmental managers.

• If 480 rooms are occupied by the guests on any day,

calculate the room occupancy rate.
 Illustration 2:

• Mr. A arrives in Mumbai and checks into a room in a five-star hotel at 4 p.m.
on 1st June 2007 at Rs. 500 per day plus 10% for service charges on European
Plan. Check out time in the hotel is 12 noon.

• Calculate the amount payable by Mr. A in each of the following

circumstances:

• (i) If Mr. A checks out at 10 p.m. on the same day

• (ii) If Mr. A checks out at 9 a.m. on 2nd June 2007

 Illustration 2:

• iii) If Mr. A checks out at 6 p.m. on 2nd June 2007

• (iv) If Mr. A checks out at 4 p.m. on 3rd June 2007.

• Show also the amount payable by Mr. A if the charges were leviable @
Rs. 500 for a stay of every 24 hours or part thereof plus service
charges at 10%.
 Illustration 2:

• A five-star hotel in Chennai has 320 lettable rooms on a particular day.

240 rooms are occupied by 300 guests. Calculate Double Occupancy Rate.
 Visitors Ledger:

• Practically, the personal accounts for visitors at an hotel may be most

conveniently recorded with the help of a tabular Visitors’ Ledger.
Note:

• Each day’s transactions are maintained in a separate page together with a column for each visitor.

• The room no. is indicated against each and every visitor.

• The amount brought down in each column represents the balance due at the commencement of the
day from the concerned visitor. Similarly, when an account is settled, the cash received is recorded
as a credit and, consequently, there will be no balance in the account which will be carried
forward in the next day’s page. But if there is any due at any date from a visitor, the same is
transferred to a personal ledger.

• The daily totals of each heading (both debit and credit) are recorded in the total column on the
right-hand side. The same is transferred to a summary ledger or ordinary ledger for the purpose
of obtaining the monthly, quarterly or half-yearly totals.
To Balance Brought down:

Besides the above, the Stock Ledger has to be maintained in

detail so that direct control must be exercised regarding
purchases, sales or uses of different items.
 PRINCIPLES OF LEDGER ACCOUNT
• (i) Separate accounts have to be maintained for receipts like Wines, Beer and Spirits etc.
and payments made against them, the balance being transferred to Profit and Loss
Account.

• (ii) Appropriate adjustments are also to be made for Meals, Laundry etc. between the
staff and the proprietor for ascertaining correct result. For this purpose, Wages Account
(for staff) and Drawings Account (for proprietors) will be debited and the particular
account, say, Meal, will be credited. Besides, all kinds of transfer from one section to
another is to be maintained accordingly.

• (iii) Expenses are to be apportioned among the different sections in an appropriate

manner and, consequently, the same will be adjusted in Profit and Loss Account.
 illustration 5:

•From the following particulars pertaining to four rooms in a hotel draw up a suitable columnar
ledger:

•(i) Room rent for each room Rs. 500 + 15% tax.
•(ii) Room 1 : Breakfast Rs. 45, Laundry Rs. 50, Local Phone calls Rs. 15.
•(iii) Room 2 : Lunch Rs. 85; S.T.D. Calls Rs. 125; Wine Rs. 60. Previous day’s outstanding
amount Rs. 1.250.
•(iv) Room 3 : Private Taxi hired from hotel Rs. 400; S.T.D. calls Rs. 350; Dinner Rs. 125; Whisky
Rs. 100; Deposited Rs. 3,500 with the hotel.
•(v) Room 4 : Opening due from the guest Rs. 575; Laundry Rs. 30; Lunch Rs. 120.
•(vi) The guest in Room 3 is a regular visitor and is entitled to a discount of 20% on room rent.
•All the foregoing transactions pertain to a single day.