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What is Cash Disbursement in Accounting? Blog


cash disbursements journal

A startup could also receive a disbursement from a dedicated venture capital fund. This practice originated in the days when banks could only process a payment after receiving the physical check, which could delay the debit to a payer’s account for up to five business days. However, the widespread use of electronic checks has made this technique less practical. Although disbursements are commonly found in business spending, there are other forms of disbursement in escrow, education, and special funds. Analyzing your disbursements is essential when determining your organization’s spending levels to manage your cash flow.

cash disbursements journal

Not all receipts are the same, and some have more information than others. A very basic receipt must include at least a unique receipt number, the quantity of and list of items purchased, the cash value for each item, and the total value of the purchase. When recording your disbursement journal, pull information from purchase receipts, checkbook stubs, or invoices. Create and update a cash disbursement journal whenever you purchase something with cash or a cash equivalent. Each of these columns is then added up at the end of the journaling period to arrive at a total sum. To help you with this process, this article will provide you with a definition of this payment type, examples, and how to keep tabs on disbursements.

What is the Cash Disbursement Journal?

Bookkeepers and accounting systems record transactions in the cash disbursements journal before the transactions are posted to the general ledger, accounts payable ledger, and other ledgers. All debit entries are recorded in the other accounts or accounts payable columns. According to the fundamental principle of double-entry accounting, the debit and credit will balance out for each transaction recorded. A cash disbursements journal is designed to capture all the important elements of each cash disbursement. The third column indicates the party who received the payment (usually called the payee). Placing the amount of the payment in a specific account category column indicates the nature of the transaction.

What is another name for the cash disbursements journal?

Definition: The cash disbursements journal, also called the cash payments journal, is a journal used record and track all the cash payments or disbursements by a company. In other words, all cash outflows are recorded in the cash disbursements journal.

Complete documentation of all entries to the general ledger or subsidiary ledgers is essential for the establishment of audit trails and determination of an account’s validity. Posting of entries as transactions occur is recommended in order to avoid omissions at the time of regulatory report preparation. Some mobile apps can only process types of digital disbursements using an email or phone number.

How to keep tabs on your cash disbursements

Receiving a refund for a previous purchase can be recorded as a negative disbursement. It is negative because the firm is receiving money back that had been disbursed for the purchase of the returned product. Unlike most disbursements, this actually increases the cash balance.

cash disbursements journal

When a law firm bills their clients for repayment of these expenses, and the clients pay their invoice, that’s a reimbursement. Another form of disbursement is payment from financial aid funds like grants, scholarships, and student loans to a student’s account (after tuition to the university is deducted). For example, students or “borrowers” who receive federal student aid might get a loan disbursement from the U.S. A controlled disbursement enables a company to review and structure payments while maximizing earned interest. Companies can leave assets in high-interest accounts to keep on generating profit, while lower interest-earning assets are used to make immediate or short-term payments. Cash disbursements measure how much money actually flows out of the company, which can be separate from profit and loss.

Format of cash disbursements/payments journal

For example, a courier service may pay the duty and taxes for a package on behalf of a customer, then charge a disbursement fee to cover those payments. We follow strict ethical journalism practices, which includes presenting unbiased information and citing reliable, attributed resources. Small business accounting is no joke, but you’re likely better prepared than you think. Once you start making careful note of your expenditures, you’ll be able to avoid any hurdles that may come up down the road. Banking services provided by The Bancorp Bank, N.A., Member FDIC.

For vendor invoices with credit terms, expenses or asset purchases like inventory or fixed assets may be recorded before a disbursement or remittance pays the cash to a supplier. Some expenses like depreciation and amortization are non-cash expenses that are not considered disbursements. When you write https://www.vizaca.com/bookkeeping-for-startups-financial-planning-to-push-your-business/ a check from a business account, that form of payment is typically referred to as a disbursement check. This term is never used for personal finance, only company payments. Disbursements are paid in cash or an equivalent method by your company during a specific period of time, like a quarter or a year.

Use the information from your cash disbursement journal to update your other records. The payments made by an attorney for its clients to third parties for court, investigation reports, and medical care are examples of disbursements. The attorney can notify its clients of the disbursements and get reimbursed. For example, when attorneys pay expenses on behalf of a client, the money paid to a third party is a disbursement.

She is a former CFO for fast-growing tech companies and has Deloitte audit experience. Barbara has an MBA degree from The University of Texas and an active CPA license. When she’s not writing, Barbara likes to research public companies and play social games including Texas hold ‘em poker, bridge, and Mah Jongg. For transactions where there is no invoice, the cash receipt may be the only proof of its occurrence.


A digital disbursement to a payee doesn’t use a paper check for payment. As the name implies, controlled disbursements allow a company to manage disbursements over a controlled period of time, usually on a daily basis. A cash disbursement report can help you keep track of cash-based spending during the year to better manage your company’s cash flow. For example, buying office supplies to replenish the diminishing stock is a positive disbursement. Normal disbursements are positive, meaning they decrease the cash balance.

  • At the end of the year, you’ll use the total in your cash disbursements journal to estimate your spending during the next year.
  • A positive disbursement happens when you create a credit in an account.
  • As the transaction is a payment for accounts payable, a $15,500 debit to accounts payable is recorded.
  • Steve also turned his tennis hobby into a career, coaching, writing, running nonprofits and conducting workshops around the globe.
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