Accounting for Disbursement

A
Report Presentation

Presented to
Prof. Normallah C. Abubakar, CPA
Faculty, Department of Accountancy
College of Business Administration and Accountancy
Mindanao State University-Main Campus
Marawi City

In Partial Fulfillment
Of the Requirements for the Course
BPA121-Yy (Government Accounting)

Members:
GUINAL, Saima B.
GURO-ALIM, Aina C.
HADJINAIF, Wahida M.
LAWAN, Saima M.
MACAPODI, Hanan M.
MACARAMBON, Analiah M.
MACARAMBON, Bai Naila T.

NOVEMBER 2024
Disbursement Accounting refers to the systematic recording and reporting of all outgoing
payments made by an entity. It encompasses the entire cycle of disbursing funds, from the
initiation of a payment request to the final settlement. The primary purpose of disbursement
accounting is to maintain transparency, accountability, and control over an organization's
financial transactions. By accurately recording disbursements, businesses can track their
expenses, identify trends, and make informed decisions regarding budgeting and resource
allocation.
 Most of the transactions in the government involve the receipt and disbursement of cash.
The cash transactions affect every classification within the financial statements - assets,
liabilities, and residual equity, income and expenses by checks. Thus it is essential that
cash transactions are recorded correctly for reliability in the financial statements.
 Disbursements constitute all cash paid out during a given period either in currency (cash)
or by check. It may also mean the settlement of government payables/obligation by cash
or by check. It shall be covered by Disbursement Voucher (DV), Petty Cash Voucher, or
Payroll.
 How to Distinguish Disbursement from Expenditures?
Expenditures are the obligations incurred by the Agency. It includes both the amount actually
paid and those incurred and recorded as liabilities to be paid in the future. While Disbursement
are payments made for such government obligations by cash or payments.
 What is a Disbursement?
A “disbursement” is a payment to an individual or entity from a private or public fund. A
disbursement may also be a payment made on behalf of a client to a third party. It may be money
paid into a business' operating budget, the delivery of a loan amount to a borrower, or a dividend
to shareholders.
A “disbursement” refers to a payment made by an entity, recorded as a debit by the payer and a
credit by the payee. It encompasses various forms of payments, including operating expenses,
loan repayments, and dividends to shareholders. Disbursements can occur in multiple contexts,
such as corporate finance, legal payments, and educational funding. A “disbursement” could
also refer to any payment made by an organization, which can include cash or cash equivalents.
Common examples include:
 Loans: A loan is disbursed when the agreed-upon amount is paid into the borrower's
account and is available for use. The cash has been debited from the lender's account and
credited to the borrower's account.
 Tuition: A student loan disbursement is the payout of loan proceeds on behalf of a
student. Schools and loan servicers notify students of the expected receipt of the
disbursements in writing, including the amount of the loan and its effective date. A
university or college may also directly give students grant money in payments called
disbursements.
  Insurance Claim: After an insurance adjuster inspects damage to a home or property, an
insurance company will disburse money for repairs, based on the terms and limits of
policies such as a homeowner's or automobile policy.
 Business Operations: Disbursement is part of cash flow and a record of day-to-day
expenses. If disbursements are higher than revenues, it can be an early warning of
insolvency.
 Retirement Account Withdrawal: When money is disbursed, it is recorded on the
account as a balance drawdown.
 Controlled disbursement: A cash flow management service for a bank's corporate
clients. Controlled disbursement allows customers to review and reschedule
disbursements on a day-to-day basis. Clients maximize the interest they earn on the cash
in their accounts by delaying when money is debited from the account.
 Third-Party Payments: When paying for services such as from an attorney, the lawyer
will commonly complete and record disbursements made on behalf of a client. This may
include payments to various third parties for costs like court fees, private investigator
services, courier services, and expert reports.

Basic Requirements for Disbursement:

1. Existence of a lawful and sufficient allotment certified as available by the budget officer.
2. Existence of a valid obligation certified by the Chief Accountant/Head of Accig. Unit;
3. Legality of transactions and conformity with laws, rules and regulation.
4. Approval of the expense by the Chief of Officer or by his duly authorize representative:
and
5. Submission of proper evidence to establish the claim.

Types of disbursements
Disbursements can be defined as the act of paying out money or transferring assets to fulfill
obligations or settle debts. They can take various forms depending on the nature of the
transaction. Some common types of disbursements include:
o Supplier Payments: Businesses often make disbursements to pay for goods or services
received from suppliers. These payments ensure the continuity of the supply chain and
maintain healthy vendor relationships.
o Payroll Disbursements: Employee salaries, wages, benefits, and reimbursements
constitute a significant portion of a company's disbursements. Timely and accurate
payroll disbursements are critical for employee satisfaction and retention.
o Loan Repayments: When an organization borrows funds from a bank or other financial
institution, disbursements are made to repay the principal amount along with any interest
accrued. Proper tracking of loan disbursements ensures compliance with repayment
schedules.
 o Tax Payments: Disbursements are made to government agencies for tax liabilities,
including income tax, sales tax, payroll tax, and property tax. Failure to make timely tax
disbursements can result in penalties and legal consequences.
o Cash Disbursement: Payments made using cash or cash equivalents like checks or
electronic funds transfers.
o Refunds: Payments returned to customers, recorded as reductions in sales.

Types of Government Disbursements

1. Operating Expenses: Payments for day-to-day operations, such as salaries, utilities, and office
supplies.
2. Grants and Subsidies: Funds distributed to individuals or organizations to support specific
projects or initiatives.
3. Contractual Payments: Payments made to contractors for services rendered to the
government.
4. Debt Service: Payments made towards interest and principal on government loans.

Process of Disbursement
The process of disbursement typically involves several steps to ensure accurate and timely
distribution of funds. Here is a general overview of how disbursement works:
1. Authorization: The disbursement process begins with the authorization of the funds to
be distributed. This can be initiated by an employer, a lender, a government agency, or
any other entity responsible for making the payments.
2. Verification: Before disbursing the funds, the source verifies the eligibility and
authenticity of the recipients. This step helps prevent fraudulent activities and ensures
that the funds are allocated to the intended recipients.
3. Processing: Once the verification is complete, the disbursement process moves to the
processing stage. This involves calculating the amount to be disbursed to each recipient
based on predetermined criteria, such as salary amounts, loan agreements, or benefit
entitlements.
4. Transfer: After processing, the funds are transferred from the source to the recipients.
This can be done through various methods, including electronic transfers, checks, direct
deposits, or cash payments.
5. Reconciliation: Following the transfer, the source reconciles the disbursement records to
ensure accuracy and proper documentation. This step helps maintain financial
transparency and facilitates auditing processes.
Importance of Accurate Disbursement Accounting
Maintaining accurate records of disbursements is vital for several reasons:
 Financial Management: Helps organizations monitor their cash flow and spending
patterns.
 Audit Compliance: Reduces the risk of errors that could lead to failed audits or penalties.
 Strategic Planning: Provides insights into financial health, aiding in budgeting and
forecasting efforts.
 Transparency: Ensures that public funds are used appropriately and can be audited
effectively.
 Accountability: Holds officials responsible for financial decisions and expenditures.
 Compliance: Adheres to legal and regulatory frameworks governing public finance.
Citations:
 https://tipalti.com/resources/learn/disbursement-meaning/
 https://quezonquezon.gov-ph.net/documents/processing-of-disbursement-vouchers/
 https://blog.peakflo.co/en/account-payable/what-is-disbursement
 https://tipalti.com/en-uk/expenses-hub/disbursement-meaning/
 https://www.checkout.com/blog/what-is-disbursement
 https://www.accountingseed.com/resource/blog/what-is-cash-disbursement-in-
accounting/
 https://corporatefinanceinstitute.com/resources/wealth-management/disbursement/
 https://eclkc.ohs.acf.hhs.gov/fiscal-management/article/what-internal-controls-are-
needed-cash-disbursement
 https://www.scribd.com/doc/191454305/Accounting-for-Disbursements-and-Related-
Transactions