Thank you.  I used your suggestion and successfully processed the cheque receipt. A little funky but it worked:  it showed in my cash and my supplier has zero balance. 

But this way doesn't show that the supplier was overpaid and the  the supplier refunded the money. Can use vendor and customer link maintenance?

If you need to see this transaction in Accounts Payable, then process an AP Credit Memo, then adjust down the CM to zero and offset the same GL account you reference in Cash Receipts.  You can't use vendor / customer link since there are no open receivables for the vendor (defined as a customer).