Cash Disbursement Journal: How to Create

What is a cash disbursement journal?

This type of journal is used to record funds coming out of your company before they are included in the general ledger. However, not every payment can be called disbursement. This term is applied to payments made with cash. At the same time, you can use it to reflect payments made with its equivalents. Having a journal like this will allow you to not miss any expenditures.

Taking a closer look at the cash payment term, we should mention that it’s not just cash. This term can also be applied in other instances:

  • Paying by cash is the first and most obvious example.
  • You can also use a check to pay for something.
  • Using electronic funds transfer is the third way.

All the payments must be recorded on a daily basis (or as made) during a particular accounting period. This period is usually a quarter or a year. If you miss at least one journal entry, it may eventually lead to misunderstandings concerning your business health.

At the same time, you should track all the cash receipts. A good example is when you pay for office supplies ordered for your office. These numbers should be recorded in your journal right away. As a rule, your receipts and disbursements are written down in two different journals. Although, there are cases when an accountant keeps those numbers together in one book.

What is meant by cash disbursements?

It’s quite simple, as almost all cash outflows can be included in this category. For instance, buying office inventory or replenishing supplies. The same goes for bigger items such as paying out dividends or applying for a business loan for a certain purpose.

Everything mentioned above is a clear example of cash disbursements. They must be recorded in a journal on the same date when they’re carried out. After a certain accounting period is over, you can look at all your disbursements and make a conclusion about what you can do to avoid some of them.

The way a cash disbursement journal looks

Every cash disbursement journal can look different depending on what type of business you have. However, the general information is usually the same, and it may look the following way.

Cash Disbursement Journal: How to Create

Some columns may be added and others removed. The most important point is to make your entries right away when they happen. This is the main rule when it comes to all accounting journals.

How to create your own cash disbursement journal

As you now know, your future cash disbursement journal will help you to track all the payments made with cash or its equivalents. All those steps are necessary to see what the actual cash flow of your business is. You should create this journal once you start spending money.

What points should be included

Everything concerning spendings should be recorded in this journal immediately. A clear example would be if you decide to buy a new piece of furniture in your office. Let’s say it will cost you $150. You should write this number in your journal to track this disbursement at the end of your accounting period.

The most important thing is to be specific. You shouldn’t just track what was the amount spent. It’s also necessary to mention the following items in your future cash disbursement journal:

  • State a precise date.
  • Write down a full payee name.
  • Mention the amount debited or credited.
  • Point out a chosen payment method.
  • State the purpose of the transaction made.

You may also add other lines if you need them. For instance, you can decide that you need to keep all the check numbers together. Everything depends on how you decide to pay, and how many details you want to track. This information varies depending on a specific period.

Where you can use a cash disbursement journal

Even though this type of journal is quite useful on its own, you should combine it with the information from other journals. For example, transferring all the details from your cash disbursement journal can be a good idea. Your general ledger can use this information for sure.

Thinking of new balances and creating them for all other accounts can be easier with the information from your cash disbursement journal. When a certain accounting period is over, use it for creating financial statements.

Complete version

Now, we’ll present you with a completed version of how a cash disbursement journal can look like. Remember that you can change the columns according to your type of business. However, this example clearly illustrates how useful this tool is.

Cash Disbursement Journal: How to Create

The most significant point is to record the information in a convenient way exactly for you. You can also try to combine it with a cash receipts journal if you feel like it’s comfortable for you. Keeping all the records is extremely important since it allows your business to grow and avoid unnecessary expenses. Hiring a bookkeeper or an accountant for that work is the best decision if you can’t handle this on your own.

Cash Disbursement Journal: How to Create

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