Understanding the specialized language used in Guesty Accounting helps you manage your finances accurately and maintain clear communication with owners and vendors. This article defines the key terms you encounter when using the feature.
Core accounting concepts
These fundamental terms define how Guesty processes and organizes your financial data.
Trust accounting
Law requires businesses to hold money belonging to others in a specific bank account called a "trust account". In the hospitality industry, you hold guest funds in this account until you transfer them to the property management company (PMC), property owners, tax authorities, or third-party vendors.
Accrual basis
Accrual basis is an accounting method that recognizes revenue and expenses when a service is provided, regardless of when you receive the actual payment. This allows you to record revenue at check-in and manage expenses, such as vendor payments, before the guest payment arrives.
Cash basis
Cash basis accounting recognizes revenue and expenses only after you receive the payment and provide the service. For example, if you recognize revenue at check-in but the guest hasn't paid, you can’t pay a cleaning vendor until that guest payment is in your Guesty account.
Revenue recognition
Revenue recognition refers to the specific timing for recording transactions in your accounting system and financial reports. The recognition or realization date determines when a transaction appears in your records and on owner statements, even if the guest payment date is different.
Locked accounting period
This compliance feature prevents anyone from modifying transactions after an accounting period ends. Locking periods reduces the chance of errors in past reports. Once locked, only users with Admin roles can make changes to those transactions.
Ledgers and records
Use these tools to track individual transactions and overall business health.
General ledger
The general ledger is the central hub for tracking and managing every financial transaction across your business. It provides detailed records organized by different accounts and dimensions.
Accounting folio
An accounting folio tracks debit and credit transactions for each account per reservation. It contains four key sections:
Advanced Deposit: Funds the guest paid into the trust account that haven't been distributed to other ledgers yet.
Accounts Payable: A liability account tracking what your business owes to third parties, such as vendors, tax authorities, OTA channels, or the PMC.
Owners: Transactions related to the property owner.
Cash: Represents money flowing in and out of your trust account for a specific reservation.
Posting journal
The posting journal is a centralized ledger where you can view, sort, and download every transaction in your system. Use it to manage journal entries for all your accounting records.
Bank reconciliation
The bank reconciliation process verifies that the amounts recorded in Guesty match your actual bank account activity. It ensures your system's cash balance accurately reflects the funds currently in your bank.
Transactions and entries
These terms describe the different ways financial data enters the system.
Journal entry
A journal entry documents a financial transaction using double-entry bookkeeping. For every entry, there are two sides. For example, recording a payment to a vendor shows cash going out and the vendor's balance changing. Use journal entries for manual adjustments where you select the debit and credit accounts.
Transaction
In Guesty, a transaction is a predefined journal entry category. When you enter business details, Guesty automatically creates the correct accounting entries for you.
Journal reversal
A journal reversal removes a transaction from your accounting records. This prevents the transaction from appearing in your balances or reports.
Disbursement
A disbursement is a payout of funds from your trust account to owners, vendors, or the PMC. It represents the outflow of money to pay off outstanding balances.
Owner charge
An owner charge is a transaction billed to an owner on a specific recognition date. It often involves a revenue split between the PMC and a vendor and can be set up as a one-time or recurring charge.
Owner expense
An owner expense is a transaction that is paid to a vendor, on a certain recognition date, and the PMC or owner is charged for it. This can be set up as a one-time or recurring charge.
Owner and revenue management
Manage your relationships with property owners using these specific financial terms.
Business model
Business models define how the system calculates and shares charges or expenses between your business, the owner, or a vendor. Your folios, reports, and statements all rely on your business model setup.
Owner statement
An owner statement is a financial document summarizing transactions for a specific owner over a set time period. It includes reservation income, expenses paid by the owner, and payments posted to them.
Net Rental Income (NRI)
Net rental income is the base amount Guesty uses to calculate commissions and owner payouts. By default, it includes the accommodation fare, though you can customize it by including additional items, such as fees and taxes.
Channel commission
Channel commission refers to fees booking channels charge for facilitating reservations. Pre-deducted channel commission is when the channel collects this directly from the guest payment before transferring the remaining balance to you.
Working capital
Working capital is the money used to fund operations and meet short-term obligations.
Working capital by contract: A static amount agreed upon with an owner to be withheld as a safeguard for repairs or liquidity.
Working capital on hand: The current, dynamic balance in the working capital sub-ledger that changes as funds move between accounts.
Data organization
Organize your financial information for better reporting and insights.
Dimension
Accounting dimensions are attributes used to classify financial data in detail. They allow you to segment information beyond traditional accounts for more granular reporting.
Category
A category is a broad classification used to organize financial data based on common characteristics.
Multiple cash accounts
With a multiple cash account setup, you can record payouts and add payments from owners for specific bank accounts. This keeps transactions separate to avoid mixing funds and allows you to reconcile each account individually.