Struggling with how to offset a vendor and a customer account balance in QuickBooks?

When you have a vendor and a customer subledger account you want to offset in whole or in part, the best way to accomplish this using QuickBooks software is to effect a swap of funds between AR and AP is via a clearing account. I usually set up a clearing account as an Other Current Asset type of account, use an Item that links to both the vendor and the customer's transactions and ensure that it's always kept reconciled to a nil balance.

The easiest way to make the swap is to use the forms, a Bill or Bill Credit to clear the vendor's AP account and depending on whether it's an increase or decrease to the customer's AR account, I would use an Invoice or a Credit Memo, clearing the agreed amount with out tax consequences of course, using an Item (use Other Charge Item Type and set up both sides of the Item to point to the same Clearing Account you've just established.

Here's the sequence:
Set up an Other Current Asset called Clearing Account
Set up an Other Charge Item called Clearing Account and open up the purchases side of the Item to link both sides of this Item to the Clearing Account
Open a Bill and choose to make it a Bill Credit or leave it as a Bill, making an entry to the Vendor (v) for the agreed amount, using the Item tab to link the Item to the Account. It's a good idea to document any agreements in writing, print out the email, or get a signature of who agreed to this transfer as it's like a payment.
Open an Invoice or a Credit Memo and enter the same amount using the same Item to link the Customer (c)
Check the register for the Clearing Account, and in fact, use the bank reconciler feature to reconcile the account each time you make such a transfer to ensure that the Clearing Account is always nil.   

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