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What Is Cash Disbursement?

Cash disbursement is when an institution pays out money to an organization or person.
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  • Written By: G. Wiesen
  • Edited By: Heather Bailey
  • Last Modified Date: 18 July 2014
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Cash disbursement is a process by which a business pays out money to a person or organization, typically related to operating expenses for that business. While the name implies this type of payment is made out in cash, which is possible, it is common for payments to be made as checks or credit transactions, too. There are a number of reasons for a business to make such a disbursement, including employee salaries, rent on physical locations, and equipment. Cash disbursement can be subtracted from cash receipts to determine revenue for a business.

There are a number of ways a business can make a cash disbursement, including the use of cash to make payments. Checks are often used to allow such disbursements to be more easily tracked and recorded by a business. The use of credit cards and similar methods has become increasingly popular, as credit cards have become more commonly accepted and allow a business to track disbursements and expenses more easily. A company can also use direct money transfers for cash disbursement purposes, usually through the transfer of funds directly from the account of the business into the account of a person or organization.

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One of the most common purposes of a cash disbursement is for payment to employees for salary. Many businesses with physical locations also incur debts regarding rent or other fees for that location, and payment of this debt is typically handled as a disbursement. The purchase of new equipment and upkeep can be an important expense handled through cash disbursement. Many companies also have a number of other operating expenses, such as website hosting and marketing or advertising campaigns and materials.

A cash disbursement is typically tracked in a ledger or journal, which is used by the company for accounting purposes. This journal usually tracks disbursements by date and can include information about each disbursement made. Such information often includes the name of the person or business the payment was made to, the form of the 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 from cash receipts to determine the revenue for a company over a certain period.

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