Sales and Purchase

[DJM]

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

[QFMathew]

Hi @DJM

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:

Contra-Invoicing, Same Customer and Supplier, Netting-off receivables and payables

Do you have a recommended method for ‘netting-off’ customers who have made supplies i.e. transfer the balance on an unpaid purchase invoice to the Customers account and apply against outstanding invoices. Do not want to use a credit notes because that would understate values in the P&L.

@DJM

he has just deducted the amount we owe him from his invoice

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