This is called a barter transaction. In order to offset an amount due to a vendor with the amount that they owe you, do the following in QuickBooks:
- Set up a clearing account. Go to Lists > Chart of Accounts, right click and choose New
- Choose a bank type account and call it Clearing Account
- Go to the Pay Bills window, Vendors > Pay Bills
- Select the bill. If only a partial amount is being traded, enter that in the Amt. To Pay column.
- Near the bottom, change the payment account to the Clearing Account and click Pay Selected Bills
- Next, go the Receive Payments window, Customers > Receive Payments
- Receive payment for the outstanding invoice in the amount needed (same as used to pay vendor bill), use Trade or Barter for the check number
- Go to the Make Deposit window, Banking > Make Deposit
- Deposit the “payment” into the Clearing Account bank account
Voila! You have correctly recorded the income and expenses. The clearing account should be zero after this transaction.
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