Always Know Your Cash -Recording Your Outgoing Cash
Whenever you pay out cash (even if you do it by writing a check), you record that transaction in your cash disbursements journal. This special journal helps you track your outgoing cash as simply as possible by including special columns for the accounts you use most. The primary credit column in your cash disbursements journal (sometimes also called the cash payments journal) is for cash. The debit columns here could be ridiculously numerous; if the journal pages included a column for every separate expense or payable account, they wouldn’t ﬁt on your desk. For that reason, limit the dedicated columns to the top ﬁve or six—the ones that are repeated the most—and stick everything else in a miscellaneous column.
The most common dedicated columns in the cash disbursements journal are accounts payable, merchandise purchases, gross payroll, and owner withdrawals. Typically, payroll has its own special subjournal to hold the details of each employee’s paycheck, and the summary transaction is recorded in the cash disbursements journal. When a transaction involves a payment to accounts payable, make sure to record the name of the vendor you paid and the invoice numbers covered by your payment.
Every time you ﬁnish a page in the journal, foot each column. Then separately combine the total debits and the total credits, making sure they’re equal; that proves your journal is in balance. Once you know the page is balanced, you can post the column totals to the appropriate general ledger accounts. Amounts in the miscellaneous column are posted individually to their general ledger accounts, and payments in the accounts payable column must be posted to the individual vendor pages in the vendor ledger.
Some companies use special expense journals in order to keep their cash disbursements journal looking cleaner. When they sit down to pay the monthly bills, they record the disbursements in the expense journal. Then they write up column totals as a single line entry in the cash disbursements journal, with a reference to the subjournal.