Description: A vendor has an A/P outstanding balance that is composed of either payments or credits due, and has issued a refund cheque/electronic payment for this balance. This cheque should be reflected in the bank (or cash) account as well as clearing out the outstanding balance due.
Solution:
A) Vendor has an outstanding balance that must be cleared
As a basic example, let's say Vendor "ABC" had three outstanding invoices for $100.00 each, therefore making their outstanding balance due $300.00. Note that this is a $300.00 credit in your A/P account.
The transactions would have been keyed through a voucher with entries similar to the following:
Expense/Asset account $100.00
A/P ($100.00)
Normally if you paid these above transactions with a cheque, the accounting transactions would be:
A/P $100.00
Bank ($100.00)
However, in this case you received a cheque instead for $300.00. This should be keyed as a credit voucher, since we need to issue a debit amount into A/P. The account that is used in the distribution lines is up to the dealer to decide, depending on where they would like to see the credit represented.
Expense/COGs/Other account ($300.00)
A/P $300.00
Once this voucher has been updated, all of the outstanding vouchers can be paid off in a cheque run with the newly issued credit voucher, netting the cheque run to $0.00 and clearing the outstanding balance, Note that the same process would be taken if the credit cheque received is less than the total of the vendor's outstanding balance, with the only difference being that the cheque run will not net to $0.00 unless partial payments are done on the vendor's outstanding vouchers.
Note that in this situation, the cheque cannot be used to both pay off vouchers and deposited into the bank, as that would effectively be doubling up the amount of the cheque. If it is preferred to send the cheque directly into the bank, a basic bank deposit voucher can be done.
B) Vendor has an outstanding credit balance that must be cleared
Using the same example from section A), except in this case the vendor "ABC" has a currently outstanding balance of -$300.00. ABC has sent a cheque for this amount, so the balance needs to be cleared out of A/P and the cheque should be deposited into the bank. A voucher must be done to issue an "invoice" into payables for this vendor, with the Cash account being used in the distribution lines:
Cash $300.00
A/P ($300.00)
Once this voucher has been updated, a cheque run can be done to clear the outstanding credit vouchers against this newly issued "invoice", netting them to $0.00 and clearing them out of outstanding. This will also issue $300.00 into the Cash account, and a bank deposit can be done in whichever method the dealer prefers (through Payables, Cash Receipts, or General Invoicing).