If a company had many transactions, that meant many journal entries to be recorded in the general journal. We would enter these four types of transactions into their own journals, respectively, rather than in the general journal. Thus, in addition to the general journal, we also have the sales journal, cash receipts journal, purchases journal, and cash disbursements journals. Many companies enter only purchases of inventory on account in the purchases journal.

It is part of the cash book of a business and compliments the cash receipt journal. A Cash Disbursement Journal serves as a central repository for recording all cash transactions. By keeping a record of every payment made, businesses can effectively track their expenses and maintain transparency in their financial operations. The ending balance in the cash disbursement journal should be compared to the related ending balance in the general ledger as part of the month-end closing process. If there is a disparity, it is likely to be caused by additional entries piling up in the journal that were not posted to the general ledger. It is also possible that a journal entry was made directly to the general ledger account that was not also entered in the journal.

3 Analyze and Journalize Transactions Using Special Journals

Therefore, it is an important document that offers useful information to any business. Keeping a clutter-free and consistent cash log will help a business in making good business decisions. The subsidiary ledger account balances can be taken from the cash disbursement ledger. These accounts should be reconciled regularly to avoid omissions and errors. Regardless of the type of company, a business owner needs to use a cash disbursement journal any time cash is disbursed to keep a record of where money is being spent. It is a critical tool in the success of any business as well as making sure all information provided to the Internal Revenue Service (IRS) is correct at tax time.

• The cash disbursements journal is a book of prime entry and the entries in the journal are not part of the double entry posting.
• At the end of the month, the total of $2,775 would be posted to the Accounts Receivable control account in the general ledger.
• A cash receipt journal is a chronological record of the cash receipts of a business.
• With this record, you can easily calculate your total expenses for each category and have a clear overview of your cash outflows.
• The credit to the cash account represents cash paid to suppliers for the period, which decreases the asset of cash.
• It is called a control total because it helps keep accurate records, and the total in the accounts receivable must equal the balance in Accounts Receivable in the general ledger.
• Journal managers must be detail-oriented and they must fastidiously record every transaction to help prevent cash from being misdirected or misappropriated.

When recording your disbursement journal, pull information from purchase receipts, checkbook stubs, or invoices. Purchasing inventory or office supplies, paying out dividends, or making business loan payments with cash or cash equivalents are examples of disbursements. Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping.

Cash Disbursement Journal Totals Used to Update the General Ledger

Use the information from your cash disbursement journal to update your other records. 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. This report shows you all of the checks you have written within the selected time period, with a subtotal for each payee, and a grand total at the bottom of the report. In short, there are more similarities in a cash disbursement and cash receipt journal than differences.