Allocate funds from one Customer to Invoices of another Supplier

I run the accounts of a small sports club & have had some funds from a sponsor. I’ve therefore created a customer & sales invoice to account for the monies received.

I now need to use some of these funds to clear some historic invoices issued to one of our athletes, where I have set the athlete up as a supplier & raised invoices against them.

Short of writing a cheque, payable to myself, I can’t workout what journal entries I need to raised to so that I can ‘charge’ the sponsor’s customer account and ‘credit’ the athlete’s supplier account. All of the funds are held in the main bank account.

I am trying to get my head around this.
Surely either you pay the athelete and everything balances or you credit the purchase invoices to cancel them and end up with the money in the bank.

Accounting for the Sponsorship income was easy. Set up new supplier raise a ‘purchase order’ & pay the money into the bank. So the ‘General Sponsorship’ nominal ledger is up £500. Job Done!

Now the player has been away on a couple of trips & so they have been set up as a client with invoices raised. Income ledger credited & Debtor Control ledger debited.

I could raise a cheque in favour of the player and distribute the sponsorship funding, only to then ask the player to write me another cheque to clear the outstanding invoices.

What I really want to do is cut out the middle step and charge the Player Sponsorship ledger (showing we’ve paid out the funds) and somehow generate a credit entry that I can then apply to the player’s outstanding invoices on the client account.

Sorry if this isn’t making any sense - don’t know how else to explain.

That sounds backwards - you’ve received the sponsorship income so the sponsor should be a customer/client (not a supplier) and the income would be a sales invoice.

So if I understand correctly:

  • you’ve received some sponsorship from an external organisation
  • one of your players owes the club some money (as a result of “a couple of trips”)
  • the same player is due to receive a share of the sponsorship money
  • and you want to offset what they owe the club against what the club owes them

Is that right?

Yes you do have it right!! I have the Sponsor set up as a customer and the income received against a sales invoice.

Your remaining assumptions are also correct. The player owes more than they are due from the sponsorship funding, so I need to create entries that will allow me to record a part payment of the outstanding invoice.


The usual way to deal with this sort of thing is to use a dummy bank account - call it something like “contra holding account”. You would make the “payment” of sponsorship money to the player out of this dummy account and then log a money in transaction for the same amount tagged to their outstanding invoice(s) to return the holding account to zero. When they pay you the balance you log another part payment for the remaining amount into your regular current account.

This topic was automatically closed after 7 days. New replies are no longer allowed.