Alright I got a real dinger for anyone interested... We have a vendor that sells a finished tool to use. We somehow ended up with $60k worth of "blanks" for this tool, that we own, but are in the vendor's warehouse. When the vendor uses them to make OUR finished tool on the POs we send him, he deducts the cost from the invoice to us. Generally speaking, our purchase orders will include finished tools that need this blank, and other finished tools that dont need this blank. So, the deduction is only applied on a partial of the invoice. Makes sense, right? My boss would like the situation to be such that, instead of simply applying a bill credit to the vendor's invoice, we issue a sales order of our own to the vendor (created as a customer), and that customer's "payment" of this sales order is applied to the vendor's (same person) final bill for ALL the tools. I proposed a bill credit that we use a partial of as needed, boss did not like that idea.

Not sur if I understand but you can do that Set up a client account for the supplier. This will track transactions where the supplier acts as a client, such as "purchasing" the blanks. When blanks are used, issue a client invoice for the supplier, reflecting the value of the blanks used in production. Create a journal entry to offset the accounts receivable with the accounts payable This will reflect the transaction where the supplier "pays" by using the blanks. After offsetting, the remaining balance on the supplier accounts will show the amount you still owe to the supplier after deducting for the use of the blanks.