Every business definitely involves various kinds of transactions, both receipts and expenses. Therefore, it is very important for companies to record every transaction in the appropriate journal.
The reason is so that companies can manage cash flow, pay bills and report them accurately. Well, one example of a journal in accounting is the cash disbursement journal.
To know more about what a cash disbursement journal is, its benefits and examples, read this article to the end!
What is a Cash Disbursement Journal?
As you know, transactions in and out of a company’s finances must be recorded in a journal as a financial report. In this case, the cash disbursement journal is one of the important journals in the company’s financial aspects.
A cash disbursement journal (cash payment journal or cash disbursement journal) is a journal used to record outgoing transactions in the form of cash.
These records allow the company to use the information to create a general ledger. Where, the ledger is a reference in compiling and reconciling annual financial reports.
Examples of transactions recorded in the cash disbursement journal are:
- Payment to creditors
- Cash purchases of office inventory, merchandise, supplies, equipment, or other assets
- Cash payments for employee wages, cleaning fees, rent, insurance, and so on
- Cash refunds to customers for merchandise returns
- Personal drawings, withdrawals of cash, merchandise, or other items by a business owner for personal use.
Benefits of a Cash Disbursement Journal
In principle, the cash payment journal functions to record all cash outflow transactions related to the company’s operational activities so that it is easier to transfer them to the general ledger. Here are the complete benefits:
- Record all details of cash payments made by the business
- Track and monitor expenses and cash flow
- Generate expense reports that can help prepare budgets and financial planning
- Reduce the risk of recording errors and fraud
- Becomes evidence and a medium for cross-examination if there are differences between records and cash evidence
- Become a benchmark or consideration for future business plans.
Information Recorded in the Cash Disbursement Journal
In the cash disbursement journal, there is several information that needs to be recorded. The following are things you need to include in your journal.
1. Debited Account
Companies usually have several accounts for different purposes. Therefore, make sure you always record which account the payment comes from.
This is useful to help the accounting team trace the origin of the debited account. Even if necessary, also write down the account number and type of account used to make verification easier.
2. Accounts Payable
This information contains the company’s total debt to certain vendors or suppliers. Recording it can help the accounting team consider the company’s debt, cash flow, profit margins, and payment times.
3. Cash
This refers to the amount of money debited from a company’s checking or savings account. This information records the net amount used to pay off certain short-term obligations and can help you keep your financial statements organized.
4. Date
It is important for an accountant to record the transaction date of each payment to avoid potential discrepancies in the company’s financial statements.
In addition, recording the date is the same as keeping a chronological history of each payment. This information can be used to track the company’s weekly, monthly or annual expenses.
5. Discounts
This refers to purchasing discounts that a company receives from third parties, such as vendors or suppliers. This information can be used by the accounting team to determine the total cost of inventory and enter it into the general ledger.
6. Draft or Check Number
For security reasons, there are times when companies use checks to carry out large transactions. In this case, noting the serial number of the draft or check number used in the payment is very important because it can help you identify it.
7. Payee
The payee is the person responsible for paying the supplier. This can include the employee’s name and title, department, or a combination of both.
Recording this information is critical, as it can help hold employees and managers accountable for their accounting and financial duties. Auditors can use this information to enforce policies and explain procedures.
8. Reference Number
This is the number on each entry you enter in the cash disbursement journal. This information can help you better track each transaction and ensure you don’t double record or miss an entry.
Example of a Cash Disbursement Journal
The form and format of the cash disbursement journal may differ slightly from one company to another. Even so, the information in it will not be much different and contains information as mentioned above.
1. Example of an Electronic Store Cash Disbursement Journal
Source: Indeed Career Guide
2. Example of Cash Disbursement Journal Format
Source: Mbizmarket
3. Example of Cash Disbursement Journal Format in Indonesian
Source: Zahira Accounting
That’s the review and example of a cash disbursement journal in this article. In essence, accounting and finance require anyone to record every detail of a transaction in detail, neatly and accurately.
Therefore, make sure you always document every incoming and outgoing transaction and don’t miss anything. To help you do all this, as a multipurpose application Labamu is ready to help you develop MSMEs. Come on, hurry up and download the application via Google Play or the App Store!
