Pearson New International Edition International pcl tp indd 1

FRONT OFFICE SEMANTICS
Accounts receivable (A/R):
Money owed to a hotel.
Accounts payable (A/P):
Money owed by a hotel.
Retained earnings:
Profits earned but not paid (disbursed) to the business owners.
Every account can experience increases or decreases. For example, funds in bank
accounts (an asset) can increase or decrease, money owed for refunds to guests (a lia-
bility) may go up or down, and profits maintained by the hotel’s owners (owner’s
equity) may become larger or smaller. To record changes to the hotel’s accounts, a
technique called double entry accounting is used.
FRONT OFFICE SEMANTICS
Double entry accounting:
System of recording financial transactions in a way that maintains the equal-
ity of the fundamental accounting equation: assets 
⫽
liabilities 
⫹
owner’s equity.
Figure 4 illustrates an account. Note its T shape, which explains how the name
T account originated. Each account has its own name and a space for both debit
and credit entries (adjustments).
FIGURE 3
Example of asset, liability and owner’s equity accounts.