How to record payment for a settlement/lawsuit?

Hello, Accountant312, 

I'll lay down the details below to help you handle the settlement payment and the bills in QuickBooks. 

Since you processed the settlement amount directly to the collections agency, you'll want to create a vendor profile for them. Go to the Vendors page, then click the New vendor button. 

To handle the open bill and the settlement payment, you'll want to process it through a clearing account. Then, create journal entries to move the $18,000 balance to the collections agency's profile. 

To create a clearing account: 

1. Go to the Chart of Accounts page.
2. Click the New button.
3. Set it as a bank, then enter a name for it (For example, Clearing account). 
4. Once done, click Save and close. 

Moving the balances: 

1. Click the + New icon, then select Journal entry. 
2. On the first line, select the clearing account then debit it for $18,000.
3. For the second line, choose Accounts Payable (A/P) then credit for the same amount.
4. Add the original vendor's profile on the second line (to map their profile) under Name. 
5. Once done, click Save and close. 

Next, you'll want to close out the original vendor's bill. To do this, open it then click Mark as paid. Next, check the bill and the journal entry you created. 

The next step is to add the clearing account's balance directly to the collection agency's profile: 

1. Create a new journal entry again. 
2. On the first line, add the clearing account again then credit it for $18,000. 
3. Add the Accounts Payable account for the second line, then debit it for the same amount. 
4. Map the collections agency's profile for the second line under Name. 
5. Click Save and close. 

Before we close out the balances (which indicates the payment to the collections agency), you'll want to create a vendor credit for the $6,000 deduction:

1. Simply click the + New icon, then select Vendor credit. 
2. Add the collections agency's profile under Vendor. 
3. For the Category, add the item or expense account (the purchase made with the original vendor). 
4. Add the deducted amount agreed with the agency.
5. Enter other details such as memo, description and the like.
6. Once done, click Save and close. 

To close out the bill and the open vendor credit, simply click the + New icon then select Pay bills. Add the collection agency's profile under Vendor, then check the open balance (it should show as a journal entry). 

QuickBooks will automatically calculate the payment and the open credits. Click Save and close after reviewing the transaction. 

This process will affect your books, so I would suggest reaching out to a ProAdvisor to guide you and ensure your account balances are correct. 

When you have the online bank transaction downloaded, simply match it to the bill payment made with the collections agency.

If you need help managing your bank records, you can check this article: Categorize and match online bank transactions in QuickBooks Online.

I'm always ready to assist! Let me know the details below if you have more questions. I'll help you overcome any obstacles in QuickBooks.