The simple answer is simple math. You entered a purchase invoice of $1000 to an account (eg. 5200). That increased the balance of 5200 by 1000 and you paid the vendor. Now if that was an overpayment of $400, then to bring down the amount owing by $400 you enter the same invoice, but with a negative $400 instead of a positive. Use the same accounts you posted to for the overpayment.

Using Pay Later, the amount will sit as a negative on your Vendor Aged report, indicating you have overpaid. But since they put the money directly in the bank account, then change Pay Later to Paid by Cheque or if you have setup an EFT credit card, you can use it. This should put the money back in the bank.

Or if the date of the credit invoice and date of the payment are different, then use Pay Later for the date of the credit purchase invoice and post a Payment (negative payments put money in the bank because positive payments take money out) on the date of the deposit (don't use a real cheque number, use the info from the deposit as the cheque number).

Thank you so much Richard, I got it correctly inputted. I figured it was obvious to do an invoice for the overpayment in the minus (eg. -400) but turns out the part that I was doing wrong was not putting it back in the same account and putting the pay later to paid. I was putting it in the account for our chequing, not advertising (as it was an advertising group we overpaid) and it was putting us even more in the hole.

Again, I appreciate your taking the time to explain it out. I won't make that mistake again!