Customer is also Vendor

Summary

I have a situation where one of my customers is also my vendor. There are balances in both AR and AP. Is there a procedure to reduce both AR and AP until one of them is zeroed-out? i.e..credit/debit memos. e.g. AR shows ABC, Inc. owes us $1,000. AP shows we owe ABC, Inc. $500. AP periodically sends us bills for our purchases, which we enter as bills. How do we show the current and old bills paid with its AR balance and reducing AR at the same time?

Question

I have a situation where one of my customers is also my vendor. There are balances in both AR and AP. Is there a procedure to reduce both AR and AP until one of them is zeroed-out? i.e..credit/debit memos. e.g. AR shows ABC, Inc. owes us $1,000. AP shows we owe ABC, Inc. $500. AP periodically sends us bills for our purchases, which we enter as bills. How do we show the current and old bills paid with its AR balance and reducing AR at the same time?

Answer

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