The cash disbursements journal, also called the cash payments journal, is a journal used to record and track all the cash payments or disbursements by a company. In other words, all cash outflows are recorded in the cash disbursements journal.
All transactions involving payments of cash for various purposes are recorded in the Cash Disbursements or Cash Payments Journal. Such transactions include purchases of merchandise and other items for cash, payment of expenses, payment to creditors on account, cash withdrawal by the owner, etc. All these transactions are credited to Cash; hence it is necessary to have a Cash Credit column. Payments to creditors on account are sufficiently frequent to require columns for Accounts Payable Debit and Purchase Discounts Credit. If payment for one or more specific operating expenses were sufficiently numerous, other special columns are added to the journal.
The credit columns for the cash payments journal are as follows:
The debit columns are as follows:
To have an acceptable level of control over cash disbursements, most companies pay all bills by check. Therefore, the Cash Disbursements Journal contains a column in which to record the number of the check written for each disbursement.
All transactions involving payments of cash for various purposes are recorded in the Cash Disbursements or Cash Payments Journal. Such transactions include purchases of merchandise and other items for cash, payment of expenses, payment to creditors on account, cash withdrawal by the owner, etc. All these transactions are credited to Cash; hence it is necessary to have a Cash Credit column. Payments to creditors on account are sufficiently frequent to require columns for Accounts Payable Debit and Purchase Discounts Credit. If payment for one or more specific operating expenses were sufficiently numerous, other special columns are added to the journal.
The credit columns for the cash payments journal are as follows:
- Cash: Each entry must have an amount in this column because each transaction involves a payment of cash.
- Purchases discounts: When purchases discounts are taken, they are recorded in this column.
- Other accounts: This column is used to record credits to accounts other than Cash or Purchases Discounts.
The debit columns are as follows:
- Accounts payable: This column is used to record payments to suppliers that have extended credit to the company. Each supplier’s name is written in the Payee column so that the payment can be entered in the supplier’s account in the accounts payable subsidiary ledger.
- Salary expense, advertising expense, and rent expense: Continue posting the column total for any column that has an account title at the top. These are accounts for which there are usually multiple expenditures in a month. Placing the account number at the bottom of the column indicates the total has been posted to its respective account.
- Other accounts: Cash can be expended for many reasons. Therefore, an Other Accounts or Sundry Accounts column is needed in the cash payments journal. The title of the account to be debited is written in the Account Credited/Debited Column, and the amount is entered in the Other Accounts debit column. If a company finds that a particular account appears often in the Other Accounts column, it can add another debit column to the cash payments journal.
To have an acceptable level of control over cash disbursements, most companies pay all bills by check. Therefore, the Cash Disbursements Journal contains a column in which to record the number of the check written for each disbursement.
At frequent intervals during the month, the amounts entered in the Accounts Payable Debit Column are posted to the creditors account in the Accounts Payable Subsidiary Ledger. The source of the entries is indicated by inserting “CDJ” and the appropriate journal page number in the posting reference column of the accounts. A check mark is placed in the posting reference column of the Cash Payments Journal to indicate that the amounts have been posted. The items in the Sundry Accounts Debit column are also posted to the appropriate accounts in the General Ledger at frequent intervals. Posting is indicated by writing the account numbers in the posting reference column of the cash Disbursement Journal.
At the end of the month, the cash disbursement journal is ruled, and the totals of each money column are taken. The equality of the debits and the credits are determined as follows:
DEBIT TOTALS CREDIT TOTALS
Sundry accounts P 2,780 Purchase discounts P 225
Accounts Payable 2,990.50 Cash 5,545.50
P5,770.50 P5,770.50
A check mark is placed below the total of the Sundry Accounts Debit column to indicate that it is not posted. Each of the totals of the other three columns is posted to a General Ledger account, and the appropriate posting reference is written below the column totals.
At the end of the month, the cash disbursement journal is ruled, and the totals of each money column are taken. The equality of the debits and the credits are determined as follows:
DEBIT TOTALS CREDIT TOTALS
Sundry accounts P 2,780 Purchase discounts P 225
Accounts Payable 2,990.50 Cash 5,545.50
P5,770.50 P5,770.50
A check mark is placed below the total of the Sundry Accounts Debit column to indicate that it is not posted. Each of the totals of the other three columns is posted to a General Ledger account, and the appropriate posting reference is written below the column totals.
References:
- Armando Baguino, et al. Principles of Accounting
- Needles, Belverd, Marian Powers, and Susan Crosson. Principles of Accounting, 2010.
- http://www.myaccountingcourse.com/accounting-dictionary/cash-disbursements-journal
- http://www.college-cram.com/study/accounting/special-journals/cash-payments-journal/