Reconcile the receivable and payable separately before accepting a proposed net settlement with a counterparty that is both customer and supplier. A shared name does not establish that the debts belong to the same legal entity or that the company may offset them.

Accounting records, calculator and glasses on a desk
Illustrative photograph by Cht Gsml.

Identify the two trading relationships

Record the contracting company, customer account and supplier account. Compare company identifiers, invoices, credit notes, payment terms and disputed items. A group trading name may cover several legal entities with different rights and obligations.

Build separate schedules showing the outstanding sales and purchase documents. Keep amounts, currencies and due dates visible. Do not combine balances simply because the software permits a journal between the two control accounts.

Obtain a documented proposal

For example, a supplier asks the company to pay a net amount after deducting a sales invoice it owes. Confirm the precise invoices and amounts the proposal covers through established contacts for both trading relationships.

Give the accountant the proposed settlement and supporting agreement for review. Where the right to set off is uncertain, disputed or affected by insolvency, obtain advice from advisers from associated law firms. This bookkeeping exercise does not establish a legal right to withhold payment.

Record the accepted settlement

Retain the approved allocation, relevant agreement and actual bank movement. The accountant should determine the appropriate entries and presentation. Keep the original sales and purchase history traceable instead of deleting both balances without an explanation.

After posting the accepted treatment, reconcile the customer and supplier statements separately. Leave any excluded invoices, differences or disputes open with an owner. A proposed net figure is not proof that either party has accepted the arrangement or that settlement is complete.

Related practical guidance

For the surrounding records and responsibilities, see bookkeeping basics, company records to keep, bookkeeping and accounting.

Official guidance: the relevant official guidance.

Help with your company records

For accounting, bookkeeping and related compliance support, contact Raffles Corporate Services at [email protected] or WhatsApp +65 8501 7133. Tell us which records or process need attention so we can discuss the relevant next steps.