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However, another way you can manage your payments is to offset your outstanding customer and supplier invoices by recording a contra payment. This topic explains how to do this.
When it comes time to pay, you record a contra payment that offsets the sale and purchase amounts. To record the payment, you'll need to set up a contra payment account. This account works like a bank account, but it's simply a clearing account which doesn't record actual cash.
OK, let's take you through it.
To create a contra payment account
- Open the Accounts List window (Lists > Accounts) and click New. The Account information window appears.
- Select Bank from the Account Type list.
- Enter an unused account number.
- Enter a name such as Contra Payment.
- Click OK.
To record a contra payment
Record your sales and purchases as you usually do (including assigning the correct tax code). When you're ready to offset sales against your purchases, record a contra payment. It's a two-step process.
- Record a payment for your sales.
- In the Receive Payments window, enter the Contra Payment account in the Deposit to Account field.
- In the Customer field, enter the customer’s name.
- Enter the amount that you need to offset against your outstanding invoices.
- Record a payment for your purchases.
- In the Pay Bills window, enter the Contra Payment account in the Pay from Account field.
- In the Supplier field, enter the supplier’s card.
- Enter the amount that you need to offset against your outstanding purchases.
After recording these payments, your bank accounts are not affected; but your receivable and payable accounts have been reduced. Also, the Contra Payment account balance will be zero.