Cash Payment or Cash Disbursement Journal: Definition, Example, Entry, Format, What It Is

The journal itemizes when checks and other types of payments are made, as well as the amounts paid, the names of the recipients, and the accounts charged. This journal is a good source document for tracking down the specifics regarding individual payments. The information in the cash disbursement journal is periodically summarized and forwarded to the general ledger. A cash disbursement journal is a record kept by a company’s internal accountants that itemizes all financial expenditures a business makes before those payments are posted to the general ledger. On a monthly basis, these journals are reconciled with general ledger accounts, which are then used to create financial statements for regular accounting periods.

• She is a former CFO for fast-growing tech companies and has Deloitte audit experience.
• She has a combined total of twelve years of experience working in the accounting and finance fields.
• Your cash disbursement journal should stay updated as you receive new merchandise, make business loan payments, or any other cash disbursing transactions.
• Cash disbursements pay for the company’s expenses and asset purchases.
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It often refers to the payment made for a client to a third party, as reimbursement will be sought from the client subsequently. If disbursements are higher than revenues or cash inflows, it raises a concern about the shortage of cash. When it comes to recording cash disbursements, be as specific as possible. Don’t just include the amount of money you spent on the transaction.

Proofs of Posting

Additionally, the journal can be used to generate reports on spending, which can be helpful in budgeting and financial planning. To use a cash payment journal, businesses must first set up the journal in their accounting software. Once the journal is set up, businesses will enter each cash payment into the journal as it occurs.

You need to make sure you have enough cash on hand during these months to make those payments. Different accounting forms show different types of payments, which might not give you a clear picture of your cash flow. For example, if you’re creating an annual budget for your business, you might want to know your average monthly overhead. The journal cash disbursement journal has a Date column, a Check Number column, a Payee column, and at least two credit columns, one for cash and one for purchase discounts. Creating any type of accounting journal can be as simple or complex as you want you to make it. The more details you add to each payment journal entry, the better understanding you’ll have of your cash outflows.

Characteristics Of A Cash Receipt

The amounts in the sundries column are separately posted to the appropriate accounts in the general ledger. A T-account is an informal term for a set of financial records that uses double-entry bookkeeping. Accounting is the process of recording, summarizing, and reporting financial transactions to oversight agencies, regulators, and the IRS.

Each account has a reference number shown in the posting reference column. The cash disbursement journal is also known as the cash payment journal. It records the payments of cash or cash equivalents in detail. Examples include repayments to creditors, payments of rents and salaries, cash refunds for the return of goods, and so on.