Cash Disbursements Journal

Managing finances is critical for any business naturally. Doing this is one of the main jobs of an accounting department. Cash disbursement is a process monitored by the accounting to simplify their job and add another level of management for payments.

Cash disbursement accounts for every expenditure payment done by the company. When one of these cash transfers occurs, it’s immediately added to the disbursement journal, including information such as:

  1. Amount
  2. Payment maker
  3. Payment receiver
  4. Purpose.

These journals, alongside many other ledgers, are meant for different areas of business activity. They are then used to fill the Ledger at the beginning of each month.

Why account it?

It may be a tedious task, but listing each item in the Cash disbursements is critical for many reasons.

The main reason is comfort. True, you could enter each payment you’ve done in a month by looking for them retrospectively, but it’s long, cumbersome, and will definitely not be thorough. By listing each payment right after it occurs, you ensure that this information is stored somewhere for future use.

The second reason is security. When you compile the Ledger, you go through different lists that hold information on all the lines that will have to be filled in. The fact that you have several copies of information on each payment stored separately is a great backup for the thoroughness of your accounting.

Even if the disbursements journal is destroyed, you have backup data. However, if you have only one piece of evidence per payment in the system, and they are scattered across it, then their removal will be catastrophic.

The third reason is speed. All your lists need to be categorized throughout the month. When you are compiling the Ledger, you’ll be able to open up each list, go through the items (also carefully categorized), and transfer this information incredibly fast. Some systems even automate the process of transferring the data, although it’s not recommended.

The main advantage

It is absolutely crucial to account for your payments this way because you can cross out the payments that had to be canceled, payments that ended up being rejected, and so on.

You really don’t want to do it in the Ledger because you have precious little time to compile each month’s financial report. Nor should you mess with these papers because they determine your company’s success no less than the payments inside the disbursements journal.