Cash Payment or Cash Disbursement Journal

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on November 16, 2021

Cash Payment Journal: Definition

A cash payment journal, also known as a cash disbursement journal, is used to record all cash payments (or disbursements) made by the business.

Examples of major cash payments in a business that may be recorded in the cash payment journal are:

  • Payments to creditors
  • Cash purchases of merchandise, supplies, equipment, or any other asset
  • Cash payments for expenses such as salaries, rent, insurance, and taxes
  • Cash refunds to customers for the return of merchandise sold for cash
  • Personal drawings of the proprietor

Cash Payment Journal: Explanation

The cash payment journal is used to record the cash disbursements made by check, including payments on account, payments for cash merchandise purchase, payments for various expenses, and other loan payments.

A typical cash payment journal is shown in the example below. The journal has a Date column, a Check Number column, a Payee column, and at least two credit columns, one for cash and one for purchase discounts. The other credit column is for Other Accounts.

If necessary, other specific account columns can be added if they are used routinely. The debit columns will include at least an Accounts Payable column, a Purchases column, and an Other Accounts column.

Again, other specific account columns can be added if needed. The main source of entries for this journal are check stubs and payment requests.

Example

To demonstrate how entries are recorded in the cash payment journal, consider the following data from Fortune Retail Store concerning its cash payments during the month of June:

  • June 01: Payment of store lease, $1,500.
  • June 01: Paid Ricco’s Pizza (account no. 12) for $76 invoice dated May 17. No purchase discount taken.
  • June 02: Cash purchase of $1,250.
  • June 03: Paid to Super Cola (account no. 5) $748.84 for invoice dated May 21. No purchase discount taken.
  • June 09: Purchase of equipment for $10,000 with 20% down payment.
  • June 10: Paid to Super Cola $1,660 for invoice dated June 1.
  • June 15: Paid manager’s salary, $2,200, for first half of June.
  • June 16: Paid $980 to Jones Farm for invoice dated June 6. Discount taken.
  • June 25: Cash purchase of $1,400.
  • June 30: Paid $1,294.60 to Mrs. Smith’s Bakeries for invoice dated June 18. No discount allowed.
  • June 30: Loan payment of $120, of which $90 is interest.

Cash Payment Journal Example
The entries in the cash payment journal are recorded and posted in a similar manner to those in the cash receipts journal. Thus, the entries are entered sequentially into the cash payment journal as they occur.

The cash payment journal is also posted in two stages. Entries to the Accounts Payable account should be posted daily to the subsidiary accounts payable ledger.

At the end of the month, all amount columns are summed. All the totals, except those in the other columns, are posted to the appropriate general ledger accounts. The accounts in the other columns must be posted individually.

They can be posted daily, monthly, or at other convenient intervals. Given that the basic posting procedures are the same as those for the other journals, the actual postings are not shown in the exhibit.

Format of Cash Payment Journal or Cash Disbursement Journal

Like a cash receipts journal, various formats are used for cash payment journals. The type of format chosen depends on the needs of the individual business. A simple format is given below:
Cash Payment Journal Format

Example

Record the following cash transactions for 2016 in a cash payment/disbursement journal.

  • May 01: Paid rent for the month amounting to $900.
  • May 02: Paid $680 in cash to S & Co. and received a cash discount of $20.
  • May 11: Paid to K & Co. $1,880 cash and received discount of $120.
  • May 14: Paid bi-weekly salaries $550.
  • May 21: Paid Sam Corporation $1,550 cash in settlement of $1,600.
  • May 27: Purchased merchandise for cash $780.
  • May 30: Paid to K & Co. $765 in settlement of $780.
  • May 31: Purchased merchandise for cash $1,000.

Solution

Cash Payment Journal Summary

Posting Cash Payment Journal to Ledger Accounts

The procedure for posting the cash payment journal to ledger accounts is described below:

  1. Total of cash column is posted as a credit to the cash account in the general ledger.
  2. Total of discount column is posted as a credit to the discount account in the general ledger.
  3. Total of purchases column is posted as debit to the purchases account in the general ledger.
  4. Accounts payable (A/C P.A) column represents the amounts paid to creditors. These amounts are posted to the individual creditor’s accounts in the accounts payable subsidiary ledger.
  5. The total of the accounts payable (A/C P.A) column is posted as a debit to the accounts payable account in the general ledger.
  6. The amounts in the sundries column are separately posted to the appropriate accounts in the general ledger. The total of the sundries column is not posted.

Discuss it with the Pros

Did that help you figure out the features and uses of the cash payment journal? We hope it did! If you have any more questions, it would be very helpful to discuss these and even other finance queries with a financial advisor in Delaware County, PA. For those of you who live outside the locality, our financial advisor page will show you the list of areas we are catering to.

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, his interview on CBS, or check out his speaker profile on the CFA Institute website.

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