A cash disbursement occurs whenever a business spends money. Accountants record these expenditures in the company’s general ledger. The cash disbursements journal provides a chronological record of all disbursements; a cash disbursement report provides a detailed analysis of all disbursements for a given time period. Disbursement reports are often customizable for financial information users.
Both cash basis and accrual accounting record cash disbursements transactions. Cash basis records the transactions whenever cash changes hands. Accrual accounting requires transactions recorded whenever a financial event occurs. Cash disbursements have their own journal so companies can easily review all cash-related transactions. The cash disbursements journal is not the same as a disbursement report.
Cash disbursement reports information in a specific format. Accountants can modify this report to list the transaction date, a brief description, the amount and any accounts holding the information. Cash disbursement reports often have a specific use. For example, an owner may desire information on the cash spent for a specific project. The cash disbursement report will list this information for management review.
When a company spends cash, it incurs a cost or an expense. Cash disbursement reports may have a different format for each of these transaction types. Costs can add value to a business. For example, spent cash may be for additional inventory, new fixed assets or other items that bring value to the business. Expenses represent a one-time use of cash. Services from suppliers, utilities and advertising are common examples. Cash disbursement reports can separate these two, as they represent different aspects of cash use.
Tracking cash is an important accounting task. Cash disbursement reports help a company ensure it does not pay too much cash for specific activities or projects. Accountants may also prepare a cash disbursement report that includes cash receipts. This benefits report users, as they can determine net cash inflows or cash outflows. Cash disbursement reports allow for a real-time review of cash spent on projects, allowing a company to make adjustments if necessary.
- "Intermediate Accounting"; David Spiceland, et al.; 2007