As far and wide the services of a travel agency expand, so is the elaborateness of its accounting procedures. Being a business model operating with multiple parties under unique financing arrangements, these agencies need to keep the flow of funds fairly sorted. This needs to be done for a clear bookkeeping and accounting of money received or paid. And so, understanding the procedure and details of accounting becomes quite a necessity for someone planning to run or establish a travel agency.
Even though the availability of travel management platforms like Pathfndr has simplified accounting for these agencies, it is imperative to know the thick and thin of travel agency accounting if planning to run a travel agency.
Accountancy for travel agencies is a dedicated information system designed to provide the necessary details. These details can be related to the company’s monetary stature, its transactions, financial executions, and everything else related to its management.
The success of travel agency management is critically based on efficient recording, accuracy of such record maintenance and the financial statement preparation. For suitable formulation of strategic business decisions and plans, travel agency accounting can be the concrete support needed.
Travel agency accounting is also needed to assess the fair status of the company. It can be simply said to be a process that enables profitability assessment of the agency as well as its financial status in both short and long run. Platforms like Pathfndr only assist with the elaborate accounting system that a travel agency may need to follow.
Below given is a detailed guide on the types of books maintained for travel agency accounting along with the financial statement preparation requirements and other pertinent details related to the procedure. Meanwhile, it can be useful to check out the role that travel agency management platforms like Pathfndr can play in maintaining the books of travel agency accounting for these companies.
Books That Need to be Created for Travel Accounting
Travel agencies need to prepare a host of books, statements, and journals for the purpose of essential travel accounting. These companies would need to create one or more of the following records and statements to keep the travel agency accounting right in place.
Journal for cash receipt
A cash receipt journal allows you to record the receipt of all revenue generated for the travel agency. The journal is recorded for an annual period and receives entries for all transactions made in cash, cheques, and credit cards.
Whether the business receives payments for tour package sale and any commissions received from a partner operator, which can include airlines, bus operators, hotels, and the likes.
While you would need to make these entries manually, using an online travel management platform like Pathfndr simplifies these records as they are directly accounted for through necessary tools used on these platforms.
A sales journal is used to account for all transactions that a travel agency makes in credit. In case your travel agency extends credit facilities to partner operators and customers, the entries would form a part of the sales journal.
Usually, travel agencies operating on a large scale use these journals. With access to the likes of Pathfndr, all credit sale records are updated automatically to this journal.
A journal of accounts receivables is used to record transactions that the travel agency makes in credit in lieu of products and services received from supplying partners. It sums up the amount that the business would owe to its suppliers, sellers, and producers for the period involved.
Journal for cash disbursal
The total outflow of cash from the travel agency’s entirety of finances is recorded in the cash disbursement journal. A majority of this journal’s entry is made with respect to its operating cost for the period, including the likes of rents, administrative expenses, selling and/or distribution expenses, legal expenses and salaries/wages paid.
Also known as the cost journal, entries to this travel agency accounting record are mostly made for cheques and drafts issued. But all of these essential entries are simplified through automation processes that platforms like Pathfndr provide.
A payroll journal is an altogether separate journal that is maintained as a record of salaries/wages and other financial benefits paid to its employees. It gives a detailed insight on the total employees working with the agency, the total outflow made in the form of salaries and wages, compensations, insurance protection provided, medical facilities, compensations, and other benefits that may be available to its employees.
Chief book of accounts
The chief book of accounts is primarily a ledger book and a summed point of accounting record for all the balance entries that the company may have. It is a critical bookkeeping record that can direct identification and verification towards all revenue sources, a total of cash and credit sales, commissions earned, and such other crucial travel agency accounting aspects.
The use of Electronic Data Processing or EDP systems in almost all travel agencies operating today simplifies all these entries, their identification and verification for performance evaluation. Platforms like Pathfndr are fast changing how these EDPs are integrated into the travel agency accounting system.
Travel Accounting System
A travel accounting system follows a design that aims to record all items related to the business’s balance sheet as well as its income statement. These items spread across the likes of the agency’s assets, liabilities, incomes, revenues, gains, losses, expenses, as well as the capital invested.
An automated travel accounting system is integrated into the operation of travel management platforms like Pathfndr to simplify the recording and identification of these accounting items of the business. It can thus be greatly useful to create your travel agency’s official website on these platforms with dedicated domains and other customized functionalities.
Below given is a list of items that are included in the accounting statements prepared as per the travel accounting system with their short descriptions.
The capital of a business in general, including a travel agency, comprises the contributions from the owners of the entity, company, partnership, or firm. The capital of the company comprises both paid and unpaid contribution of the owners to the company. It can be summed up as the net worth of the travel agency that it owes to the owners. Depending on the type of the company a travel agency is established as, the capital and ownership can either be considered as separate or as one and the same.
Irrespective of the ownership-entity divide, the items comprising the capital of the travel agency must be accounted for individually. In the case of a company form of travel agency, the capital can include its shares and debentures. For travel agencies formed as partnership firms, the contributions of individual partners comprises the capital of the agency. In case of individual owners, their entire investment comprises the capital of the travel business.
A travel agency runs on definite resources that it utilizes to generate revenue. Such resources are invested into the business to generate benefits from operations in the future. These resources that contribute to benefit generation over the time are known as assets of the company.
The identification of assets is intended to increase the business’s cash flow in the long run through cyclic usage. A travel agency’s, or any company’s for that matter, assets can be identified under two classes, namely fixed and current assets. It is crucial to identify these assets separately for the purpose of travel agency accounting.
A liability of a travel agency can be identified as a claim against the assets that it utilizes for revenue generation and profitability. These can also be understood as the future sacrifice of economic benefits that the business undertakes for asset generation or for providing services, ultimately leading to debt creation charged on these assets. Like assets, liabilities of a travel agency are also identified under two types, and are known as long-term and short-term (current) liabilities.
Be it assets, liabilities, or any other item of the accounting system that the travel agency needs to maintain can be easily identified under the aegis of travel management platforms like Pathfndr. These records are summed up at the end of each accounting period and can be accessed through website accounting automation processes run through Pathfndr.
The total value of services/products that a travel agency provides, the interest received from clients, commissions from partner operators and such other contributions that form a part of the total incoming monetary value can be identified under this accounting head. Revenue of the company is the total value of sales made, out of which the gains are identified as revenue minus the expenditure incurred.
The total cost that a travel agency incurs, including the cost in the long as well as short term, for running the business can be accounted for under the expenses head of the travel agency accounting system. Expenditures are also identified as the sum of cash outflow made by the agency in return of services or products received towards the entity’s operation in short as well as long run.
While maintaining the travel agency accounting system can be quite extensive for an agency, the use of travel management systems like Pathfndr can make the entire process of handling the business’s accounts simple and convenient, requiring minimal manual efforts and time.
Financial Statements That Need to be Prepared
For any accounting system, including that of travel agency accounting, the output of the records need to be formally created based on the identified and accepted statements. These statements are popularly known as the financial statements of the travel agency and are categorized under income statements and position statements.
Income statement: An income statement of a travel agency is also maintained as a profit and loss account for the company. It is created to assess the overall profitability of the company for an identified period based on the income and expenditure made for the said duration. It is an important part of travel agency accounting.
Position statement: A position statement of a travel agency is created to assess its overall financial health. It is a periodic statement, and is often created at the end of the definite term identified for the accounting cycle. It usually comprises the assets and liabilities of the travel agency on a said date and helps identify the resources used and their financing.
In the overall consideration of travel agency accounting system maintenance for the travel agency, creating a dedicated department and hiring the skilled personnel for the purpose can be an extensive process. It also involves resource allocation and can be a tedious process overall.
As an alternative, a travel agency can seek to automate the entire travel agency accounting system through necessary tools in place. One of the best ways to implement this automation is to create the business website through Pathfndr, a travel management platform that comes preset with all the tools necessary for accounting and bookkeeping of the agency.
The automated processing tools are well-designed to automatically record and compute the accounting results as and when desired. So, the travel agency does not have to go through an extensive travel agency accounting process periodically.
Travel agency accounting is a crucial aspect that a travel agency needs to take care of at all times, irrespective of its scale and geography of operation. The availability of travel management platforms like Pathfndr and their integration of automated accounting tools amps up the overall financial management of the company.
Creating your agency’s travel website through these platforms can benefit in so many more ways than just adequate and timely recording and assessment of the financial aspect of the business.