IF I SELL grain to a buyer and he decides to deduct an amount that i owe to him from the cheque how do i enter this in quickbooks ?

Hey jmlipton,

QuickBooks Online really makes it easy to track your Accounts Receivable and Accounts Payable. To maintain this simplicity, Customers and Suppliers are considered completely separate entities within the program. But real life isn't always that simple. There are times when one of your customers is also your supplier. Thankfully, we're able to apply an Accounts Payable balance against Accounts Receivable using a simple transaction. I'll show you how this is done.

Before I get started, these steps assume this individual is set up as a supplier. I'll go over how to get them set up, but feel free to skip these steps if you're already ahead of me.

Setting up the supplier side is just a few simple steps:

1. Head to your Expenses tab then select Suppliers.
2. If they don't already exist as a supplier, click New supplier in the top right and enter their information (Display name must be different than the customer's).
3. Click New transaction then create a Bill for the amount you owe him.

Similarly, the customer side only takes a second:

1. Head to your Sales tab then select Customers.
2. If they don't already exist as a customer, click New customer in the top right and enter their information (Display name must be different than the supplier's).
3. Click New transaction then create a Invoice for the grain you sold them.

It's important that both the customer and supplier sides have an open balance remaining. Once this is set up, we can proceed to the fun part. All it takes is a quick journal entry: 

1. Make note of the amount being deducted. This is the amount we'll be taking from Accounts Payable to apply against Accounts Receivable.
2. Click on + New then select Journal Entry.
3. In the ACCOUNT column, select Accounts Receivable (A/R) on the first line
4. Enter the amount being deducted in the CREDITS column.
5. Select the customer version in the NAME column.
6. Keep the SALES TAX column empty
7. In the ACCOUNT column, select Accounts Payable (A/P) on the second line.
8. Enter the amount being deducted in the DEBITS column (should be the same amount).
9. Select the supplier version in the NAME column.
10. Click Save and close.

It should look something like this:

Once this Journal Entry is saved, we can immediately apply it against the bill and invoice. This is a quick but important step to ensure we have the correct balance owing:

1. Click on + New and select Cheque. 
2. Select the supplier version, and add the journal entry and the bill (the Amount Paid should show $0).
3. Click Save and close. 
4. Click + New and select Receive payment.
5. Select the customer version, and check the invoice and the journal entry (the Amount Received should show $0).

Now you'll be left with the correct amount receivable. 

Let me know if there's anything else I can help you with. This is a tricky transaction to record at first, but I'm confident you'll be a pro in no time!

Hi, I have a similar situation to the topic.

I tried to follow the steps but QB is not allowing me to enter Accounts Payable in the 2nd line. It has an error message that says: "Select a different type of account for this line. You can only select an accounts payable (A/P) or accounts receivable (A/R) account on the first line of a journal entry, and it can only be used once in the same transaction." 

Basically, a Customer owes 30.00 but the same Customer is also a Vendor and we owe 200. Thinking of just cutting a cheque for 170 and apply the 30 to the A/R. Is there a way to do this?

Thank you.

Abskiboo

Thanks for reaching out to us, @Abskiboo.

Allow me to share the steps to help you with this concern. For now, you can only assign one Accounts Payable and Accounts Receivable account on a journal entry. It can never have more than 2 lines for each account.

In this case, we can use a different method. This is a long and complicated process but I've added a step-by-step instructions for you to follow. Before anything else, enter a bill for $200 and delete the existing invoice of $30. Once done, set up the clearing account.

Step 1: Create a Clearing bank account.

1. From the Settings ⚙ icon, select Chart of Accounts.
2. Press New to create a new account.
3. Choose Bank for the Account Type ▼, and Cash on hand for the Detail Type ▼.
4. Enter the account name. (ex. Clearing Account)
5. Hit Save and Close.

Step 2: Transfer $200 from the main bank towards the clearing account.

1. From the + New, select Transfer.
2. Select a main account from the Transfer Funds From ▼ drop-down.
3. Enter all the clearing account in the Transfer Funds To ▼ drop-down.
4. Add $200 in the Transfer Amount field.
5. Once done, press Save and close.

Step 3: Edit the bill and add a discount item of $30. After that, pay the bill.

1. Open the bill and add a service item for discount.
2. Enter a negative amount to reduce the payment.
   
3. To pay the bill, go to the Create icon ⨁ then Pay Bills.
4. From the Payment account ▼ drop-down, choose the clearing bank account.
   
5. Mark the bill you’ve created earlier for the commission, then pick Make payment under Balance Due.
6. Put the amount before pressing Save and close.

Step 4: For the remaining $30 on the clearing account, create a journal entry. Credit the clearing account and debit Accounts receivable. This process will automatically create an invoice for the customer.

Step 5: Receive the payment to put back the $30 in your checking account.

Now, the clearing account should have a zero balance. See this:

Post here again if you have other concerns about the process of applying the payments. I'm here if you need further help. Wishing you a great and productive day!

Hi @Jen_D 

Thank you for your reply. I followed all the steps. However, in Sep 2 no. 4, I think it should be "Add $30" (instead of $200). Other than that, it's great. Thank you so much!

Abskiboo