Sales and Purchase

I have a client that owes us funds and we owe him finds, the bill to us is none vat the bill to him is vat. he has just deducted the amount we owe him from his invoice, as the sales and purchase are separate of how do i net this off. any help would great as need to account for the vat


If your client is also your supplier you could set up a contra-invoicing account to manage the funds between both.

See this topic with help on setting this up:

As he deducted it from the value of the invoice, or the outstanding balance?