How do I offset sales and purchase from the same/different parties? Using Party Journal

Party JE can help to contra between 2 customers, 2 vendors, or between a customer and vendor

A/ FOR CUSTOMER VS VENDOR:

Suppose we need to contra

• INV000087 Sales Invoice for $450
• VINV000153 Purchase Invoice for $600.

We need to knock-off  $450 against $600 of the Purchase Invoice

Step 1: Create a Party Journal Entry

Go to Journal Entry and choose Create New

Choose “Party Journal Entry”

On the top, make sure to select Generate CN/DN

Key in the right debit/credit amount to the right account. Using the figures in the example, the entry should be

 

Account Payable                                    Dr 450               

       Trade Creditors                                            Cr 450

Click Save

Please note the Customer Credit Note and Vendor Debit Note numbers

Step 2: Link the Debit Note Purchase Invoice, Credit Note Sales Invoice.

Go to Customer Credit Note and find the Credit Note you just created and click Link Transaction.

Choose the correct Sales Invoice No. Enter the knock-off amount ($450) and click Link transaction.

Do the same steps for Vendor Debit Note. Link to the Purchase Invoice and enter the knock-off amount

Now, if you make payment to the vendor, you will see that the amount you have to pay is already knocked-off by 450.

B/ FOR CUSTOMER A VS CUSTOMER B:

1/ If customer A is a subsidiary of customer B. Customer A owes you SGD 50 (sales invoice of SGD 50) while you owe customer B SGD 100 (customer CN of SGD 100)

2/ Create a Party Journal Entry with Customer DN and Customer CN of amount SGD 50.

3/ Link the Customer CN to sales invoice of customer A to cancel out the outstanding amount of SGD 50 

4/ Link the Customer DN to customer CN of customer B to reduce the outstanding amount of the customer CN to SGD 50.

5/ Hence, as a result, you owe customer B SGD 50 through customer CN

C/ FOR VENDOR A vs VENDOR B:

1/ If vendor A is a subsidiary of vendor B. Vendor A owes you SGD 50 (vendor DN of SGD 50) while you owe vendor B SGD 100 (purchase invoice of SGD 100)

2/ Create a Party Journal Entry with Vendor DN and Vendor CN of amount SGD 50.

3/ Link the Vendor CN to vendor DN of vendor A to cancel out the outstanding amount of SGD 50

4/ Link the Vendor DN to purchase invoice of customer B to reduce the outstanding amount of the purchase invoice to SGD 50.

5/ Hence, as a result, you owe vendor B SGD 50 through purchase invoice

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