Disbursements may be internal or external. Internal disbursements are designed to be posted for items where your firm has provided a service to the client, e.g. for postage, photocopying, TT fees, etc. For this type of disbursement, there is never a bank entry involved and VAT is always added, at the time of billing, on top of the transaction amount. Internal disbursement VAT is added to the client bill at a rate of 20%.

When a debit entry is posted, the amount debits office and credits an accruals nominal on the balance sheet. When the same debit entry is billed the accruals nominal is debited and the amount credits an income nominal on the profit and loss.

External disbursements are designed to be posted for external agency or 3rd party payments that your firm is paying on behalf of the client. For this type of disbursement, there is always a bank or nominal entry, which can be VATable or non-VATable entries.

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