Pearson New International Edition International pcl tp indd 1

Accounting formula
Entry
component
(adjustment)
Result
Asset
Debit
Increase
Credit
Decrease
Liability
Debit
Decrease
Credit
Increase
Owner’s equity
Debit
Decrease
Credit
Increase
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GUEST CHARGES, PAYMENT, AND CHECK-OUT
The owners are considering purchasing a vacant lot adjacent to the hotel for
$50,000. If they agree to pay $50,000 for the lot and secure a bank loan to finance
the purchase, the following account changes affect the accounting formula:
•
A debit (increase) in an asset account (Land) to reflect ownership of the
$50,000 lot
•
A credit (increase) in a liabilities account (Notes Payable) by $50,000 to reflect
the loan
The accounting formula for the Altoona would be revised to read:
After the land is purchased, both sides of the equation would still be equal
(i.e., in balance with) each other.
Various revenue and expense accounts are used by FOMs. They are part of the
owner’s equity portion of the accounting equation and are summarized at the end of each
accounting period in an income (profit and loss) statement. Figure 6 demonstrates 
the impact of debit and credit entries on revenue and expense accounts.
An FOMs’ primary accounting responsibility is to manage guest folios, which can
be considered individual accounts for each guest. Therefore, debit and credit entries
for these accounts should follow the same rules as those used for all other hotel
accounts. Assume a guest stays at the Altoona Hotel and owes the hotel (has a folio
balance of ) $100. Two accounting entries will properly record the guest’s payment.
$13,050,000
=
$13,050,000
or
(Assets)
=
(Liabities)
+
(Owner's equity)
($13,000,000
+
$50,000 lot)
=
($10,000,000
+
$50,000 loan)
+
$3,000,000
Controllers record credits and debits in their revenue and expense accounts.
L
aima D
ruskis/ P
earson Educ
ation/P
H Col
lege
505

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