Credit to a vendor

Hi dfampound!

Yes, you will need to create an invoice for the materials they purchased and a bill for their service. Basically, you'll need to create a customer and a vendor profile so you can create an invoice and a bill. Just put a slight difference in the profile names by adding a middle name or a vendor or customer extension so you can save them. Example: John - Cust and John - Vendor

The roadmap is to offset the balances of the two transactions via journal entry and with the use of a clearing account. It's usually a bank account type that has zero balance and is used to offset balances between A/P and A/R.

Here's an article to guide you through the transactions: Set up a clearing account.

Let me know if you have other questions in mind, Take care!

I don't think I understand this correctly: you reduced the bill payment by the amount of the materials the vendor 'purchased' from you? I would consider that a credit, not a purchase.  If that's the case, enter the vendor's bill for the full amount (materials kept included) and then enter a vendor credit for the amount of the materials the vendor 'purchased'.  Then, when you go to pay bills, you can apply the credit and QB will write a check for the remainder.

I found an old reference book that basically walked me thru the same thing, except creating invoice/bill and expensing/receipting to a Barter Account, which washed it out.  Basically what you said, but more rudimentary as I am not fond of journal entries ;)  Appreciate the help!