How to do a “contra” where my customer is also my supplier?

Example :

I issued an Invoice for $1000, I bought $600 from the same customer. Customer & I want to do a ” contra ” hence the customer only pays me $400/-. My¬†debtors reports still shows $600 outstanding. How do I sort this out ?

First enter a new receipt and knock off the Invoice as usual with the $400.00 you received from the customer. Post this to your bank or cash account where you deposited the funds. Your Accounts Receivable still shows $600 outstanding. Call for a New Receipt, and enter the amount of $600 to knock-off the $600 still outstanding on the invoice. Instead of charging it to your bank or Cash Account, charge it to a “Contra Account”. You cannot charge it to your bank account.