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Like a payment journal, a receipt journal would also work as a source document. Balances on a cash receipt journal can be carried forward to subsidiary ledgers and eventually to the general ledger accounts. The account balances in a cash disbursement journal may not balance each other as they do in the general ledger. This journal only records cash payments; therefore, transactions made for the same accounts on credit would not show up.

Accounting Ratios

It’s a categorized list that tracks the outflow of cash and helps maintain accurate financial records. Since the cash disbursements journal also includes the check numbers of any checks that were issued, management can clearly scan the journal for missing or incorrectly written checks. This is why many accounting software packages like Quickbooks tend to call the cash disbursements journal a check register. For instance, a retailer would have many payments for inventory, accounts payable, and salaries expenses.

• One benefit of using special journals is that one person can work with this journal while someone else works with a different special journal.
• A cash disbursement journal is a multi-column form that includes several pieces of information.
• When it comes to recording cash disbursements, be as specific as possible.
• The posting reference would be to indicate that we had entered the amount in the accounts payable subsidiary ledger (Figure 7.29).
• This is a very simplistic example but would show how transactions are recorded.
• This example showcases three cash payments made on different dates, with each entry having a unique description and amount disbursed.
• At the end of the month, we total the Cash column in the cash receipts journal and debit the Cash account in the general ledger for the total.

If you look at the example in Figure 7.23, you see that there is no column for Utility Expense, so how would it be recorded? We would look up the account number for Utility Expense and credit the account for the amount of the check. If we received a refund from the electric company on January 28 in the amount of $100, we would find the account number for utility expense (say it is 615) and record it. The cash disbursements journal (or cash payments journal) is an accounting form used to record all cash outflows.

The Cash Disbursements Journal

In some businesses, the cash disbursement journal is combined with the cash receipts journal and referred to as simply the cash book. In this case the debit entry is to the accounts payable control account in the general ledger, and represents the reduction in the amount outstanding to suppliers. Had the cash disbursement journal recorded other items such cash purchases etc. then the debit would have gone to the appropriate purchases or expense account. In the purchases journal, using the perpetual method will require we debit Inventory instead of Purchases. For a refresher on perpetual versus periodic and related accounts such as freight-in, please refer to Merchandising Transactions.

Management can use this journal to not only see how much cash has been disbursed, it can also track what cash is being used for. In other words, management can look through the cash disbursements journal and see what ratio of cash is being spend on inventory compared to the amount of cash being spent on paying other bills. 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.

Balance Sheet

A business would transfer account balances from a cash journal to subsidiary ledgers and then the general ledger. Therefore, there are two possible methods to prove the authenticity of a cash payment journal. For example, suppose a business pays a supplier cash of 380 in respect of a purchase invoice of 400 less 5% cash discount. The line item posting to the accounts payable ledger would be for 400 to clear the supplier account. Finally the discounts received column total of 20 (in this case assume there is only one item for the accounting period) is posted to the general ledger discounts received account.

• It’s a simple yet powerful tool that can help you stay in control of your cash flow and make smarter financial decisions.
• A cash disbursement is a payment that a business makes with cash or a cash equivalent.
• Both the cash amount has to be recorded under the cash credit account and the same amount has to be debited from a corresponding account.
• The transaction will decrease the company cash and decrease the liability as well.
• If we paid this month’s phone bill of $135 with check #4011, we would enter it as shown in Figure 7.26 in the cash disbursements journal.
• At the conclusion of the journaling period, each of these columns is then summed up to get a total.

This book uses the Creative Commons Attribution-NonCommercial-ShareAlike License and you must attribute OpenStax. This book may not be used in the training of large language models or otherwise be ingested into large language models or generative AI offerings without OpenStax's permission. My Accounting cash disbursement journal Course  is a world-class educational resource developed by experts to simplify accounting, finance, & investment analysis topics, so students and professionals can learn and propel their careers. Shaun Conrad is a Certified Public Accountant and CPA exam expert with a passion for teaching.

And when you have cash expenses, you should record them in a cash disbursement journal. It is important to understand that if any cash is paid, even if it relates only to a part of a larger transaction, then the entire transaction is entered into the cash disbursements journal. Any accounts used in the Other Accounts column must be entered separately in the general ledger to the appropriate account. Figure 7.25 shows how the refund would be posted to the utilities expense account in the general ledger.