Your cash disbursement journal is a record of all of your business’s outflowing cash. By itemizing all cash payments, this journal helps businesses organize their outgoing cash records. Creating journal entries for small business transactions should be like second nature.

• By itemizing all cash payments, this journal helps businesses organize their outgoing cash records.
• It uses a computer program fully designed by in-house programmers of the business or accounting software that is readily available in the market.
• As the name implies, there are two columns for this type of cash book.
• This is the most advanced method of recording your accounting entries.
• If we ordered inventory from Jones Mfg. (account number 789) using purchase order #123 and received the bill for $250, this would be recorded in the purchases journal as shown in Figure 7.28.
• The total of all accounts payable subsidiary ledgers would be posted at the end of the month to the general ledger Accounts Payable control account.

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. At the end of the month, we would post the totals from the sales journal to the general ledger (Figure 7.19). Match each of the transactions in the right column with the appropriate journal from the left column.

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When the customer pays the amount owed, (generally using a check), bookkeepers use another shortcut to record its receipt. The cash receipts journal is used to record all receipts of cash (recorded by a debit to Cash). In the preceding example, if Baker Co. paid the $1,450 owed, there would be a debit to Cash for $1,450 and a credit to Accounts cash disbursement journal Receivable. A notation would be made in the reference column to indicate the payment had been posted to Baker Co.’s accounts receivable subsidiary ledger. After Baker Co.’s payment, the cash receipts journal would appear as in Figure 7.21. The general ledger accounts are updated monthly using the totals from the cash disbursements journal.

There are numerous reasons why a business might record transactions using a cash book instead of a cash account. Mistakes can be detected easily through verification, and entries are kept up to date, as the balance is verified daily. By contrast, balances in cash accounts are commonly reconciled at the end of the month after the issuance of the monthly bank statement. Bookkeeping and accounting can make use of two procedures at the end of an accounting period to prove that the information in the cash disbursement journal has been correctly transferred to the subsidiary ledgers.

How to Create and Update Your Cash Disbursement Journal

He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University. You should prepare an Affidavit of Loss explaining the valid reason for losing your books of accounts.