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Disbursement is a financial and accounting term. Bankrate explains what it means.

A disbursement is the paying out of funds, whether to make a purchase or other transaction. A disbursement can be made using cash or other methods of payment.

Deeper definition

In accounting terms, a disbursement, also called a cash disbursement or cash payment, refers to a wide range of payment types made in a specific period, including interest payments on loans and operating expenses. It can refer to cash payments, electronic fund transfers, checks and other forms of payment.

Each disbursement is recorded in a company’s ledgers, along with details about the transaction, including the date, amount, to whom the payment was made, and the method of payment. Also included are the reason for the payment and how it affects the company’s cash balance. Keeping track of disbursements helps companies monitor cash flow to ensure what they’re spending doesn’t exceed what they’re taking in.

The company accountant typically enters disbursements in a separate cash disbursements journal, and then transfers them over to the general ledger, usually once a month. By keeping a separate cash ledger, a company can better track where its cash goes and how much it spends on specific types of expenses.

Disbursement can also refer to a loan payment, such as a student loan. When a student gets education loans from the federal government or a private lender, the lender sends the money to the school and the school pays, or disburses, the money to the student after it deducts tuition and fees. A student typically receives a student loan in multiple disbursements, such as once a semester.

Disbursement example

Lulu is the treasurer for the homeowners association at her condominium. She collects all the HOA fees, deposits them at the bank, pays all the HOA expenses and keeps the financial records. Each month, she makes a report of the HOA’s income and disbursements. Typical monthly disbursements include utilities, pool and lawn maintenance, legal fees and the maintenance worker’s salary, among other costs. At the end of each month, Lulu totals the income and disbursements. At the end of the year, she uses the disbursements total to estimate the spending for the following year.

Use Bankrate’s calculator to figure out how long it will take to pay off your student loans.

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