---
title: "Link Supplier and Customer with Common Party Accounting"
space: "ERPNext"
url: "https://docs.frappe.io/erpnext/common-party-accounting"
updated: "2026-07-02"
---

Common Party Accounting is used when the same business party is both a Customer and a Supplier.

For example, a company may usually buy from a party and record Purchase Invoices against them as a Supplier. Later, the same party may buy goods or services from the company, so a Sales Invoice needs to be raised against them as a Customer. Common Party Accounting lets ERPNext link these two party records and adjust balances between them.

This is useful when receivables and payables belong to the same real-world party.

## When to use Common Party Accounting

Use this feature when:

- The same party exists as both a Customer and a Supplier.
- You want to adjust a Sales Invoice against a Purchase Invoice, or the other way around.
- You want ERPNext to create the accounting adjustment automatically when the invoice is submitted.

## Example scenario

A company has been buying from a Supplier and has unpaid Purchase Invoices. Later, the same Supplier buys something from the company. To record this, the company creates a Customer record for the same party and raises a Sales Invoice.

Instead of separately collecting money and paying the supplier, the outstanding amounts can be adjusted through Common Party Accounting.

## Setup steps

### 1. Enable Common Party Accounting

Go to:

```
Accounts Settings > Enable Common Party Accounting
```

Enable the setting and save Accounts Settings.

### 2. Create or identify both party records

Make sure the party exists in both roles:

- Customer
- Supplier

These are separate master records in ERPNext, even if they represent the same real-world organization.

### 3. Link the Customer and Supplier

Create a Party Link between the two records.

If the primary party is a Supplier:

```
Supplier > Actions > Link with Customer
```

If the primary party is a Customer:

```
Customer > Actions > Link with Supplier
```

ERPNext creates a Party Link so it knows that the Customer and Supplier represent the same party.

![](/files/Common Party A.mov)

## Transaction flow

```
Enable Common Party Accounting
        |
        v
Create Customer and Supplier records
        |
        v
Link Customer and Supplier using Party Link
        |
        v
Create invoice against the secondary party
        |
        v
Submit invoice
        |
        v
ERPNext creates adjustment Journal Entry
        |
        v
Use the advance to reconcile the linked invoice
```

## What happens after invoice submission

After the linked invoice is submitted, ERPNext checks whether Common Party Accounting is enabled and whether a Party Link exists.

If both conditions are met, ERPNext automatically creates a Journal Entry. This Journal Entry creates an advance balance against the linked party.

For example:

- A Sales Invoice is created against the linked Customer.
- ERPNext creates an advance against the linked Supplier.
- That advance can then be reconciled against a Purchase Invoice for the Supplier.

The same idea applies in the opposite direction when the linked party relationship is reversed.

## Reconciliation

Once the Journal Entry is created, use the advance amount to reconcile the outstanding invoice of the linked party.

For example, if a Sales Invoice created an advance against the Supplier, that advance can be used to reconcile an outstanding Purchase Invoice.

## Important notes

- Common Party Accounting works only when the Customer and Supplier are linked using Party Link.
- The feature must be enabled in Accounts Settings before ERPNext can create the automatic adjustment.
- Customer and Supplier remain separate masters. The link only tells ERPNext that they represent the same business party for accounting adjustment.
- Review the generated Journal Entry before reconciliation, especially when using multiple currencies or different receivable and payable accounts.

## Summary

Common Party Accounting helps adjust receivables and payables when the same party is both a Customer and a Supplier. After enabling the setting and linking both party records, ERPNext can create the required Journal Entry automatically and make the balance available for reconciliation.