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Enter contra payments in QuickBooks

by Intuit•49• Updated 2 months ago

If you work with a company that is both your customer and supplier, you can use a contra entry to offset a sales invoice against a purchase invoice. This helps simplify your accounts when the same entity owes you money and you owe them money.

Example

Your company has:

  • A sales invoice of ÂŁ500 for a customer named Mr Smith
  • A bill of ÂŁ1,000 to Mr Smith as your supplier

You can use a contra entry to offset the smaller invoice (ÂŁ500) against the larger one.

Go to + New or + Create and select Journal entry.

For line 1:

  • Account: Debtors (Accounts Receivable)
  • Credit: Enter the amount to offset (ÂŁ500 in the example)
  • Name: Select the customer

For line 2:

  • Account: Creditors (Accounts Payable)
  • Debit: Enter the same amount (ÂŁ500)
  • Name: Select the supplier

Select Save to record the journal entry.

  1. Open the outstanding invoice.
  2. Select Receive payment.
  3. Use the journal entry to pay off the invoice in full.
  4. Save the payment.
  1. Open the outstanding bill.
  2. Select Make payment.
  3. Apply the journal entry to settle part of the bill.
  4. Any remaining balance will stay outstanding for later payment.

Key points

  • Always use the lower invoice value when creating the contra entry.
  • This method keeps your accounts accurate while reducing manual calculations.
  • Contra entries can be reversed or adjusted if payment amounts change.
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