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• # 98928
• Wed 09 Apr 2014 03:28 PM

Everyone was so helpful with my last Quickbooks question so I now have one more..

I have a rather complicated situation where one of my clients deals with a company which is both a customer and a supplier (set up as each) and the company in question has decided to issue supplier credit notes to offset some sales invoices that have been sent out. I rang quickbooks support but they were really not sure and I didn't have a great deal of confidence in what I was told.

Does anyone have a method of matching these items together?

I am quite new to Quickbooks and this is giving me a brain ache!

Many thanks for any ideas.

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• # 98933
• Wed 09 Apr 2014 05:55 PM

JulietC said:

“

Everyone was so helpful with my last Quickbooks question so I now have one more..

I have a rather complicated situation where one of my clients deals with a company which is both a customer and a supplier (set up as each) and the company in question has decided to issue supplier credit notes to offset some sales invoices that have been sent out. I rang quickbooks support but they were really not sure and I didn't have a great deal of confidence in what I was told.

Does anyone have a method of matching these items together?

I am quite new to Quickbooks and this is giving me a brain ache!

Many thanks for any ideas.

 

”

 Set them up as both a Supplier & Customer (you may have to change the name slightly or put a full stop after the name when creating one of them as it won't accept the 2 names the same)

1.  The supplier ideally needs to issue an invoice to the customer.

     You would 'enter a bill' for this amount

2.  The customer will raise an invoice accordingly

3.  Create a bank account called 'contra account' 

If the client wants to offset one against the other you would.

4.  Go to 'receive payments' for the customer invoice

5.  Allocate the money to the 'Contra Account'

6.  Save

7.  Go to 'pay bills' for the supplier invoice

8.  Tick the item you want to pay but make sure you pay it out of the contra account where you just put the 'pretend money'

The Contra account should now be zero,  you haven't touched the actual bank account but the accounts will show a true reflection of the 'In's and Outs of the business.

Hope this helps

• Kindest Regards
   
  Sharon - Group leader Cardiff
                ICB Regional Chair for Wales
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• # 98962
• Thu 10 Apr 2014 09:43 AM

Thank you but the supplier is issuing a credit note not a bill so although the customer invoice is cleared by the supplier credit note if I mark them as received using the contra bank account they will both be amounts received so will not cancel each other out. How can I make them cancel each other out - using a journal maybe?

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• # 98997
• Thu 10 Apr 2014 07:08 PM

The supplier must have issued a bill in order to have a credit to raise........the credit is then the 'payment' - no payment is actually received because it's 'contra'd' with the bank account - this is instead of the credit note. 

For example, a business sells pencils and buys in pens..........these happen to be the same price and he supplies pencils to the same company as the one that can supply him with the pens...

He sells 100 pencils to ABC for £100, but he buys in 100 pens from ABC for £100 too. He raises an invoice to his customer for £100 and he enters the received bill from his ABC customer/supplier for £100 too. No money changes hands, but he receives his money into the contra bank account, and he pays his bill to the contra bank account too - there is no need for any credit notes.

If a credit note (on the supplier side) was raised, this would mean that the expense never happened, because the credit note would cancel it out, so to do it this way, a credit note on the customer side would also have to be raised, but then this would understate both businesses on their P&L.

Unless there's another reason for raising the supplier credit, the way Sharon has explained is the correct way to deal with it, and the credit note should be scrapped.

I hope this makes sense. It takes a bit of getting your head around...........

Carol

• Carol Saunders
  Lady of Ledger Book Keeping
  Telford, Shropshire

  
  

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• # 99071
• Sat 12 Apr 2014 03:52 PM

Dear Lady of Ledger,Yes it is rather complicated as the reason for the customer invoice is a warranty claim and my client is the engineer billing for his time and expenses for completing the work necessary for this warranty claim. Then the supplier (same company as customer) is giving a credit note to pay off the invoice for the work that has been carried out. The supplier credit note is therefore not against a supplier bill. Does this make it clearer - I am finding it difficult to get my head around it from a Quickbooks perspective!Thanks

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• # 99075
• Sun 13 Apr 2014 11:49 AM

Hi Juliet

Could it be that you're trying to zero everything in QuickBooks, when in reality, you need to 'receive' a benefit from the Supplier in order to 'use' the credit note?

Create the Conta bank account, then Receive the payment for your Customer invoice and put the ‘money’ into this contra bank account. This has paid your clients outstanding warranty invoice.

Now do a journal entry on the same date. Make sure that the first line entry you do is to Accounts Payable – a debit of the same amount as your customer invoice (gross amount, if VAT registered) and in the NAME field, make sure you’ve selected the name of your supplier (if you accidently select the ‘customer’ name here, when you try to save the transaction, QuickBooks will tell you that you must have a Supplier name in here). The second line of your journal will be a credit entry to the Contra bank account – leave the name field empty this time. This has now zero’d your contra bank account and put a credit amount in your supplier account, equal to that of the invoice in the customer account.

Now, when the supplier provides your client with some products or services and ‘bills’ them, the credit is sitting there waiting to be used against this bill that comes in. So all benefit has been used and correctly entered.

I hope this solves the complexity and helps 

Carol

• Carol Saunders
  Lady of Ledger Book Keeping
  Telford, Shropshire

  
  

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• # 99693
• Fri 16 May 2014 06:02 PM

Hi Carol
Apologies for the delay and thank you for all your help. I have sorted it now so all good.
Juliet

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