Expert: Arthur Naman - 9/26/2008

Question
If a receivable amount due from a customer to me is paid directly to one of my suppliers, what asset account do I dump the invoice payment into in order to record receipt of that payment?  On the Customer Payment screen (in QuickBooks), I typically "Deposit To" my checking account, but that doesn't seem like the place to record it, since the funds did not actually pass through my checking acct.

Answer
Since no funds were received by you, nor paid out by you, there should be no entry to a cash/checking account. No deposits were made; no checks written.

Consider using a credit memo to record the "payment" received from the customer. You can also credit a credit for a bill due to a vendor.

You can use a so-called "clearing" account for the offsetting entry -- which should balance to zero after both entries to receivables and payables.