Vendor bills must be entered in for specific companies, and those companies have a specific operating (bank) account set. You can pay bills using a different bank account than the bill company's operating account, but there will be a warning informing you of the different account.
For example: a vendor has one bill for $150 that has two line items: $100 for Company A and $50 for Company B. Company A uses the operating account Bank A and Company B uses the operating account Bank B. A single bill payment of $150 is made from Bank A for this bill. The journal entries will be as follows:
In cash accounting:
The bill has no journal entries since no money has been paid yet.
The bill payment will have two journal entries:
On
Company A's book, creditBank Afor $100 and debit an expense account for $100On
Company B's book, creditBank Afor $50 and debit an expense account for $50
In accrual accounting:
The bill will have two journal entries:
On
Company A's book, creditAccounts Payablefor $100 and debit an expense account for $100On
Company B's book, creditAccounts Payablefor $50 and debit an expense account for $50
The bill payment will have two journal entries:
On
Company A's book, creditBank Afor $100 and debitAccounts Payablefor $100On
Company B's book, creditBank Afor $50 and debitAccounts Payablefor $50
A manual journal entry can then be created on the same date as the bill payment to record the liability that Company B owes to Company A instead of Company B having a negative balance in Bank A.
Company B- debitBank Afor $50 soCompany Bwill have a $0 balance in that bank accountCompany B- credit a liability account for the $50 owed toCompany ACompany A- creditBank Afor $50 soCompany Awill have an accurate bank balance since the $50 was originally recorded onCompany B's bookCompany A- debit some asset account for the receivable owed byCompany B
When Company B pays back Company A, another manual journal entry can be created to record the transfer. 3 of the 4 line items are simply reversing the previous manual journal entry.
Company B- credit a bank account belonging toCompany Bto record the payment going toCompany Afor the money owed[Reversal]
Company B- debit the liability account for money owed toCompany Athat is now paid[Reversal]
Company A- debitBank Afor money received fromCompany B[Reversal]
Company A- credit the asset account for the receivable owed byCompany Bthat is now paid
This is commonly used when one company (usually the property management company) pays bills on behalf of another company, and then collects the funds back at a later time.
You can track these bills by generating an Account Activity report under Reports > Accounting. In Preview Parameters, set Account to Bank A and Company to Company B. In the screenshot here, Bank A is "Chase Account" and Company B is "Trantow-Barton":
If you never want to pay bills from a different company's operating account, you can edit the bank account to only be linked to a single specific company.
If a bank account is linked to only a single specific company, payments cannot be made to other companies using that bank account. If you attempt to submit such a transaction, you will get an error message. Linking a bank account to a single company is useful for avoiding user errors if you have a separate bank account for each of your companies.
