Your customer or a 3rd-party (third-party) (not your customer) pays you and your vendor.
- You have a $7500 invoice for a customer. This $7500 invoice comprises a charge of $2500 for your work, and $5000 for work done by your vendor.
- You also have a $5000 bill from this vendor for the work they did.
- The vendor's $5000 charge is posted to your expense account.
- And, the $7500 invoice charge is posted to your income account.
The customer paid you $2500, and paid $5000 directly to the vendor. You now need to close the invoice and bill. The following process will close both the invoice and the bill, preserving the postings to the income and expense accounts. This process will also work when both you and the vendor are being paid by a 3rd-party party (not the customer).
- Create an asset, bank account named Scratch.
- On the invoice, receive a payment of $2500, depositing it in your usual receipts checking/undeposited funds account.
- On the invoice, receive a payment of $5000, depositing it to the Scratch account.
- Pay the $5000 bill from the Scratch account.
This process will ensure your P&L reports are correct, and records of customer income and vendor expenses are correct.