ICAI Issues Guidelines For Hospitality Sector

New Delhi, July 29: | Updated: Jul 30 2002, 05:30am hrs
The Institute of Chartered Accountants of India (ICAI) has issued a technical guide for accounting and management control system of the hospitality industry. This includes recognition of room revenue on accrual basis, management authorisation of discounts, and coding of department specific accounting heads. In an elaborate chapter on the financial accounting aspects peculiar to the hotel industry, ICAI has stated that the current practice of recognising revenue from room rent either upon the guest checking out or upon the passage of checkout time should be replaced by recognising revenue on accrual basis. Internal control aspects have a direct impact on the leakage of revenue. ICAI has recommended that hotels should design procedures of internal control in a manner that no person is able to completely control any activity. The work of an employee should be made complimentary so that it is open to verification.

In the matter of discounts, ICAI has stated that discounts should be granted discreetly. All non contractual discounts granted to the guests must be duly approved. In small and medium sized hotels, which do not have formalised systems, the management must draw up fixed standard room rent and lay down a clear policy for allowing discounts, the technical guide prepared by the institute states.

The guide also enumerates various control measures that should be adopted in the area of purchases. In order to ensure proper monitoring of stock levels and avoiding purchase of excessive stocks, the reorder level, maximum order quantity and maximum and minimum stock levels should be defined and clearly prescribed for each item of inventory.