Cash disbursement occurs when an institution pays money to an organization or person.
Cash disbursement is a process by which a business pays money to a person or organization, usually related to the operating expenses of that business. While the name implies that this type of payment is made in cash, which is possible, it is common for payments to be made by check or credit as well. There are several reasons for a business to make such an outlay, including employee salaries, rental of physical locations, and equipment. Cash disbursements can be subtracted from cash receipts to determine a business’s income.
There are several ways a business can disburse cash, including using cash to make payments. Checks are often used to allow a business to more easily track and record these disbursements. The use of credit cards and similar methods has become increasingly popular as credit cards become more commonly accepted and allow a business to more easily track disbursements and expenses. A business can also use direct money transfers for cash disbursement, typically by transferring funds directly from a business account to an individual or organization’s account.
One of the most common purposes of a cash disbursement is the payment of wages to employees. Many businesses with physical locations also incur rental debt or other fees for that location, and the payment of that debt is generally treated as an outlay. The purchase of new equipment and its maintenance can be a significant expense managed through cash outlay. Many businesses also have a number of other operating expenses, such as website hosting and marketing or advertising campaigns and materials.
A cash disbursement is usually tracked in a general ledger or journal, which the business uses for accounting purposes. This journal typically tracks disbursements by date and may include information about each disbursement made. This information typically includes the name of the person or company to whom the payment was made, the form of payment made, such as cash or check, a tracking number, and the general reason for the disbursement. These payments are subtracted from the total income of the cash receipts to determine a company’s income for a given period.