What Is a Cash Disbursement Report?

When a company spends money to pay an expense, whether by cash, check, electronic transfer or any other method, this is known as a cash disbursement in the world of accounting. A cash disbursement report is a record of every transaction that has involved cash paid out by the company for any reason. The report is typically generated by a company’s accounting software package, such as QuickBooks.

Tip

The cash disbursement report is a record of all of the individual transactions that involve cash paid out by a company.

Cash disbursements represent the individual expense transactions that make up the expense totals shown on a company’s income statement. This includes payments for wages and salaries, inventory, outside legal services, the building rent and every other expense that the company incurs. When the company pays invoices, it records the payments to a cash disbursements journal in its accounting software system.

The company’s profit and loss statement shows the cash disbursements at a high level, and the expenses are shown in different time periods depending on whether the company uses cash- or accrual-basis accounting.

In accounting, the term “journal” is used to describe a list of recorded transactions that have been segregated by type. A business typically uses several journals in its accounting system, such as a journal for sales, cash receipts, cash disbursements and a general journal. In many accounting software packages, users don’t see the individual journals.

These transactions are posted to the company’s general journal because when a user generates checks or enters invoices to the system, entries are automatically made to each specific journal and then transferred to the general journal. This has eliminated the need to manually record transactions in an individual journal such as the cash disbursement journal. When accounting transactions were recorded by hand, the entries would have been manually recorded into a cash disbursement journal first and then transferred to a general journal.

One of the most important uses for a cash disbursement report is to assist in maintaining tight internal controls over the cash that leaves the company so that it doesn’t end up in the wrong hands. This is part of a larger process of cash internal controls which includes many steps, such as segregation of duties, meaning that no financial transactions are handled from beginning to end by just one employee.

The cash disbursement report can give business owners necessary information on expenditures to help manage them over time. For example, it shows how much was spent on inventory for the month, the amount spent on personnel wages, rent and leases and expenses for any outside services. The cash disbursement journal can be used as a resource to plan future cash management decisions. The report also provides a level of detail that is necessary to help prevent anyone in the company from misappropriating or misdirecting cash. For example, reviewing the report over time can help track payment patterns to spot unusual activity or to spot and verify large disbursements to make sure they are legitimate.

When the company disburses cash, it should always use a preprinted, numbered check and have policies in place on who in the company can authorize check payments. Also, when a company pays invoices, it should mark them as paid to prevent unscrupulous or erroneous double payments. Reviewing the cash disbursements report every month is an efficient way to catch this and other issues.

It’s important for a company to have a very limited number of people, perhaps three or four maximum, who have the authority to sign company checks. If an unusual disbursement shows on a cash disbursement report, it becomes a simple matter to track down the check copy and speak with the person who signed the check to verify the transaction. Check signers should have a significant and appropriate authority level within the company.