Process: 

There are two types of payments which are recorded within a business - Payments to Suppliers/ Trade Creditors and other Payments. When paying a supplier, from whom a purchase invoice has previously been received and recorded through the Purchases Entry Screen then payment to the supplier is simply reducing the amount owing to that supplier.

For any payments which are not supplier related / for which an invoice has not been received see Payments - using Payee Option.

Navigate to Bank> Payments

Payments From                  

Select the bank account from the drop-down list from which the payment was made (bottom right-hand corner of the entry screen). You must ensure you are working from the correct bank account at the start.

Reference

This is the cheque number or the bank statement reference in the case of Direct Debits/Standing Orders.

Date

Date as written on the actual cheque or in the case of Direct Debits/Standing Order the date of transaction per the bank statement.

Supplier/Payee

Select the Supplier from the Supplier listing (F2) that you are paying.

Nominal Account              

If a Supplier is selected from the Supplier listing the Nominal account will default to Trade Creditors, this cannot be changed.

Amount       

The amount per the cheque or bank statement. The entry posted for a Payment to a Supplier is :

In choosing a Supplier in the Supplier/Payee option you may only reduce the amounts payable to Trade Creditors and reduce the bank balance, no VAT will be captured at this point as it is assumed that the Suppliers invoice was posted via the Purchase invoice entry at which point the VAT was already captured.

If a purchase invoice has been posted then the Trade Creditors account is showing an amount due to the Supplier, the expense has already been captured and the VAT has already been captured also.

The P&L accounts for actual expenses, the expense was already captured through the Invoice posting so at this point you are merely creating an entry to note that the amount (or part of it) is no longer due to the Supplier but is now paid and the bank balance is reduced accordingly to denote the payment out of the bank account. 

So now the bank account balance has been reduced because the account has been credited and the Trade Creditors account has been debited reducing the amounts payable to Suppliers.