GUEST and CITY Ledgers in ACCOUNTING of HOTEL Business

In hotel accounting, receivables and revenue handling for in-house guests are managed primarily through the Guest Ledger (also referred to as the transient, rooms, or front office ledger).

Your observation highlights two distinct operational workflows where room revenue and receivables are recognized, posted, or settled:

1. Daily Revenue Recognition via Night Audit (The Closing Process)

• What it is: At the close of the business day (typically rolled at 00:00 / 12:00 AM), the night auditor executes the daily audit routine.
• The Accounting Mechanism: This process automatically or manually posts room charges and applicable taxes directly to the individual open folios of all active, in-house guests.
• The Receivable Impact: This increases the total balance of the Guest Ledger (Accounts Receivable - Transient), formally recognizing that revenue has been earned for that night's accommodation before actual cash collection occurs.

2. Guest Checkout and Settlement (Cash & Direct Payment)

• What it is: When a guest departs at the end of their stay and settles their outstanding folio balance.
• The Accounting Mechanism: When payment is settled via cash, credit card, or debit card at the front desk, the transaction is processed immediately, bringing the guest's folio balance to zero.
• The Transition: The asset account transitions from a transient guest receivable directly into Cash, Bank, or Clearing accounts. Note: If a guest checks out on approved corporate billing instead of immediate cash payment, that balance is transferred out of the Guest Ledger and into the City Ledger for back-office collection.