How to create contra entries in Sage Accounting to offset amounts owed between a customer and supplier.
Description
If a customer also supplies you with goods or services, you can cancel out what you owe each other using a contra entry.
This process involves creating a special bank account for the contra entry, ensuring that the transactions do not affect your real bank account balance.
Resolution
Create a contra entry bank account
- Go to Banking, then select New then Bank Account.
- In the Account type list, select Current.
- Enter the Account Name. For example, Contra entries bank account.
- Select Save.
- Select the Contra entries bank account.
- Check the Ledger Account nominal code is correct.
- Edit if required, then select Save.
Process contra entries
▼ Record a payment against the sales invoice using the contra entry bank account - Go to Sales, then select Sales Invoices.
- Select the relevant invoice.
- Select Record Payment, then enter the relevant information:
| Amount Received * | Enter the amount to contra against the supplier invoice. For example, if the customer invoice is £200 and the supplier invoice is £150, enter £150). |
| Paid into Bank Account * | Choose the contra entry bank account. |
| Date Received * | Enter the date for the contra entry. |
| Reference (optional) | Enter a reference for the contra entry if required. |
- Select Save.
▼ Record a payment against the purchase invoice using the contra entry bank account - Go to Purchases, then select Purchase Invoices.
- Select the relevant invoice.
- Select Record Payment, then enter the following information:
| Amount Paid * | Enter the amount to contra against the customer invoice. For example, £150. |
| Paid from Bank Account * | Choose the contra entry bank account. |
| Date Paid * | Enter the date for the contra entry. |
| Reference (optional) | Enter a reference for the contra entry if required. |
- Select Save.
The balance on the contra entry bank account should now be zero. If both the sales and purchase invoices were for the same amount, no further action is necessary. If one of the invoices was for a higher amount, this remains outstanding until you record a payment against it using your normal bank account.
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