Using a Temporary Posting Journal in Your Business

Some businesses use a Temporary Posting journal to record payments that are made without knowing how the cash outlay should be posted to the books and which accounts will be impacted. For example, a company using a payroll service probably has to give that service a certain amount of cash to cover payroll even if it’s not yet known how much is needed for taxes and other costs.

In this payroll example, cash must be disbursed, but transactions can’t be entered into all affected accounts until the payroll is done. Suppose a company’s payroll is estimated to cost $15,000 for the month of May. The company sends a check to cover that cost to the payroll service and posts the payment to the Temporary Posting journal.

After the payroll is calculated and completed, the company receives a statement of exactly how much was paid to employees and how much was paid in taxes. After the statement arrives, allocating the $15,000 to specific accounts such as Payroll Expenses or Tax Expenses, that information is posted to the Cash Disbursements journal.

If you decide to keep a Temporary Posting journal to track cash coming in or going out, before summarizing your Cash Disbursements journal and closing the books for an accounting period, be sure to review the transactions listed in this journal that may need to be posted in the Cash Disbursements journal.