Non Income Payments received from vendor that are paid out to customer

I can help you enter these transactions correctly in QuickBooks Online (QBO), @ShelleyB1.

To do this, we can use a clearing account. This account is used to transfer money from one account to another when direct transfer is not possible. Let me guide you how to set it up.

1. Go to the Lists menu, then select Chart of Accounts.
2. Right-click anywhere, then click New.
3. In the Add New Account window, choose the Bank radio button.
4. Select Continue.
5. Enter Clearing Account, Barter Account, or Wash Account in the Account Name field.
6. Do not enter an opening balance.
7. Hit Save & Close.

For more detailed information, you can refer to this article: Set up a clearing account.

Once the account is set up, you can post the payment from the vendor in the account using bank deposit. When the customer pays, you can create a check using the clearing account so that it will have a zero balance.

Just in case you want to reconcile your accounts to match your bank and credit card statements, you can check out this article for more guidance: Reconcile an account in QuickBooks Online.

You're always welcome to return to this thread if you need further assistance with entering your transactions in QBO correctly. The Community has your back.

@ShelleyB1 

This is not an example of when you should use a clearing account.  When you receive the funds from the vendor, assign an other current liability account to the deposit.  Then, assign the same liability account to the payment made to your customer.  The reason you don't want to use a clearing account is that the money received from the vendor is a liability and you want to record it as such.