Recording Credit to Expense from different Accounts

Thank you for being detailed about your concern, @A59Treasurer. I'd be happy to share with you the steps on how you can record a credit to an expense.

In QuickBooks Desktop (QBDT), you can create a Vendor Credit to record the amount your vendor owes from you. Let me guide you how:

1. Open your QBDT program then go to the Vendors menu.
2. Choose Enter Bills and click the radio button for Credit.
3. Select vendor V on the Vendor dropdown.
4. Click the Items tab and enter the item you purchase for vendor V.
5. Input 100 in the amount field.
6. Once done, click Save & Close. 

Next, you can create a bill to record the service your vendor made for you. Here's how:

1. Navigate to the Vendors tab and choose Enter Bills.
2. From the Vendor dropdown, pick vendor V.
3. Select the Items tab and enter the service item.
4. On the Amount field, type 80.
5. When done, click Save & Close.

Then, to reduce the expense from vendor V by $80, you can link the credit to the bill you've created. Refer to the steps below:

1. Select the Vendors menu and click Pay Bills.
2. Check the box for the $80 bill created for vendor V.
3. Next, click the Set Credits option to apply the credit you made.
4. Mark the available credit you want to apply and select Done.
5. Then, click Pay Selected Bills and select Done. 

For more information on handling vendor credits in QBDT, please see this article: Enter a refund from a vendor.

In QBDT, monitoring your business expenses and accounts payable is a breeze. The program has ready-made vendor reports you can open at any time and customize depending on your business needs. 

I'm here to back you up again if you have more questions about recording credit against an expense. Just post the details here and I'll get back to you as soon as I can.

Hi, I appreciate your reply, but after looking how it appeared in our system, it may be more complicated than we need. We are a non-profit and use cash-basis for accounting, and typically don't have use billing or invoices. The A/P account is also not used.

For reporting and budgeting, this is all we really need:

• The item we purchased for vendor "V" is not a typical expense, and for budgeting purposes it is fine if the amount eventually goes to 0 ,as the pay back what we spent.
• The service purchased from vendor "V" however, is something we want to track, and the full amount should appear on our reports, since it could be considered an ongoing expense.

So I created a journal entry like this, which seems to be close enough:

I guess my only question is if this accomplishes what we want, does it violate any accounting standards? At this point the only actual money to go out was our check to the external vendor. The rest is all internal to our org. Thanks!