I have just joined this forum, so hello everyone! I've been bookkeeping for a year in a small company, and use Xero online software (which is fab!)
I am getting myself very confused, so I am hoping someone can talk sense to me We owe a company say £10, but they owe us say £30. We want to offset what we owe against what they owe, so they only pay us £20.
Do I send them a credit note for £10? Or do they send me one? How do I account for it? I thought they would send us a credit note, but they have asked me for one... oh dear...
Using your example, your customer would pay you £20. Your supplier ledger would show that you owed them £10; the customer ledger would now also show £10 being outstanding.
You would then need to contra (or net off) these two balances. I haven't used Xero so it may have a function that can do this. If it doesn't, then to clear these two ledger balances, you would either have to post (i) a dummy sales credit and a dummy purchase credit or (ii) a dummy customer receipt and a dummy supplier payment.
Neither party should need to issue actual credit notes.
-- Edited by Robert Pearce on Thursday 8th of December 2011 03:11:37 PM
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Pearce & Co - Chartered Accountant and Chartered Tax Adviser
We owe a company say £10, but they owe us say £30. We want to offset what we owe against what they owe, so they only pay us £20.
