FF&E (Furniture, Fixtures & Equipment) Reserves are funds set aside for future capital expenditures such as room renovations, furniture replacement, or major equipment purchases. Many hotel management agreements require the owner to contribute a percentage of revenue into a reserve fund, and owners typically want to see this allocation on their financial statements.
FF&E Reserves are not actual operating expenses – they represent a future obligation. Because of this, they do not appear on a standard Profit and Loss (P&L) statement by default. However, they can be displayed on the Operating Statement for Owners report in Inn-Flow by setting up the appropriate Chart of Accounts and entering a monthly journal entry.
Note: The Operating Statement for Owners is a version of the P&L that includes additional non-operating line items relevant to property owners, such as management fees, debt service, and reserve contributions. It differs from the standard Operating Statement by showing items below the Net Operating Income line.
Chart of Account Setup
Two accounts are needed to properly record and display FF&E Reserves:
P&L Expense Account – Create an expense line item such as "FF&E Reserves Expense" in the Non-Operating Income and Expense section of your chart of accounts. This account captures the monthly reserve contribution on the Operating Statement for Owners, showing it as a below-the-line expense.
Balance Sheet Offset Account – Create a liability or equity account such as "Replacement Reserves Offset" on the Balance Sheet. This account accumulates the total reserve balance over time and serves as the offsetting entry for the monthly expense.
To set up these accounts, navigate to Administration > Chart of Accounts and add the accounts in the appropriate sections.
Monthly Journal Entry
Each month, enter a journal entry to record the reserve contribution. This is not tied to an actual cash transaction – it is an accounting entry that allocates the reserve amount on the financial statements.
Navigate to Accounting > Journal Entries and create a new journal entry for the current accounting period.
Debit the FF&E Reserves Expense account (P&L) for the monthly reserve amount.
Credit the Replacement Reserves Offset account (Balance Sheet) for the same amount.
Save the journal entry.
How It Appears on Reports
After the journal entry is posted:
Operating Statement for Owners – The FF&E Reserves Expense line appears in the Non-Operating Income and Expense section, below Net Operating Income.
Balance Sheet – The Replacement Reserves Offset account shows the cumulative reserve balance in the liabilities or equity section.
Important: The account setup shown here is a suggested example. You can place these accounts in different departments or sections of the financial statement based on your management agreement requirements or owner preferences.