In some cases, you may purchase from and sell to the same contact. If you have set the contact up as a customer and a supplier, it has possible to have balances in both accounts simultaneously. Assuming the contact was currently a net customer, you could consolidate the two balances as follows:
- Create a new GL Account as a Balance Sheet account or consider using the 'Conversion Suspense' account. Ensure that its Displayed in Sales and Purchases. Read the Chart of Accounts help document for more info.
- Create a Sales Credit Note equal to the amount you owe the supplier. In the line item, assign this to the GL account from step 1 above. The customer balance should now be the same as the overall balance for the contact (customer balance offset by supplier balance).
- Optionally allocate the Sales Credit Note against one or more of the outstanding customer invoices.
- Create a Purchase Credit Note for the same amount using the same GL account in step 1. The GL account should now be zero.
- Allocate the Purchase Credit Note to the outstanding supplier invoices. The supplier balance should be zero.
This solution is suitable if you are 'Not VAT Registered' or are registered and use the 'Accrual Basis'. If you are 'Flat Rate Registered' or use the 'Cash Basis' then you would need to test this and run the VAT Report to ensure that nothing unexpected happens. Allocations of Credit Notes do impact the VAT Report for 'Flat Rate VAT' and 'Cash Basis'.