Dealing with a counterparty that is both a Customer and a Supplier

Where a counterparty is both a customer and supplier then you should create them as a customer AND supplier on Liberty Accounts.

Recording invoices/bills

All documents should be recorded on the system as usual i.e all invoices and credit notes to the customer account and any bills to the supplier account. This ensures that the sales and purchase ledgers as well as income and expenses are accurately reported.

Contra payments

Some organisations choose to net the invoice/bill amounts and either pay or receive the net difference. Where this option is taken you should record both the net receipt/payment AND the contra'd amount. The contra, as it won't go through the physical bank account should be recorded using a pseudo bank account or using Cash/Undeposited Receipts account.

Example of contra payment

Say we invoice for £1,000 but receive a bill for £750 from the counterparty. The net receipt from them will be £250 which we will receive in the bank account.

When the monies are received in the bank they should be allocated against the invoice but that leaves the remainder of the invoice as due as well as the bill.

To record the payment of the remainder of the invoice (the contra amount) record through 'Income - Receive Payment' but applying the income to the pseudo bank account (or Cash/Undeposited Receipts if that is what you chose to use). To record the bill payment (again the contra amount) record under 'Expenditure - Pay Bills' again applying to the pseudo bank account. With both contra entries recorded the pseudo bank account nets to a nil balance.

No invoices/bills recorded

Not all organisations record invoices and bills i.e. they record transactions directly to the income/expense accounts. In this case the same principle applies i.e. it is important to record the full expense and full income to the relevant income/expense accounts so that your reporting is accurate.

As illustrated in the example above you would record the net receipt/payment amount that is on your bank record and then record the contra receipt and payment using 'Income - Misc Income' and 'Expenditure - Add Payment'.