Occasionally, a user has a customer and vendor that is the same company. Although the books would be “cleaner” if the transactions in each venue were kept separate, sometimes it just doesn’t happen.
This information covers a case where the customer/vendor makes a payment that is reduced by the amount of the invoice it received.
The basic principles are covered in the following T-Chart:
| (+) Debit | (-) Credit | Other Journals | |||
| Original AP Invoice | COGS | AP Account | AP | ||
| Original AR Invoice | AR Account | Revenue | AR | ||
| Partial Payment Received | Cash | AR Account | AR | ||
| Create a Credit Memo | Any Suspense Account | AR Account | AR | ||
| Create a negative AP Invoice: Same vendor | AP Account | Any Suspense Account | AP |
The two original transactions are in the first two lines. The partial payment that was received is on the third line. It should be handled the same as any other customer payment.
The next two transactions should take care of the unequal offsetting transactions.
Enter a Customer Credit Menu for the difference between the payment and the amount due. Then enter a negative Vendor invoice for the original invoice, but be certain to not charge it to the Expense, COGS, WIP, or whatever original account; instead, charge it to a defined suspense account. Finally enter a zero dollar check against the original invoice, listing the offsetting invoice first, and then the original invoice, to show that both are paid.