In most cases, joint checks (sometimes called Two-Party checks) are received by sub-contractors in the construction industry. Many of our contractor clients receive these checks and they are made payable to "XYZ Sub-Contractor" and "ABC Supplier". In this case, ABC Supplier is the Vendor of XYZ Sub-Contractor and has supplied material for a particular job.
The General Contractor does this with the intent to ensure the supplier gets paid timely by the sub-contractor. Additionally, this will prevent a lien from being attached to the property.
The first thing you want to do in QuickBooks is create a "Joint Checks - Clearing" bank account. While not a real bank account, it will be used as a clearing account for the two-party checks. Once you have completed the steps below you will endorse the check and send to ABC Supplier to deposit in their bank account.
Below is an example of invoicing the General Contractor for $20,000. Also you can see the bill provided by ABC Supplier for materials provided for this job ($1500).
PPP General Contractor sends you a payment of $1500 and you receive the payment like normal but deposit it into the Joint Checks - Clearing bank account. Next you will pay the bill from ABC Supplier from the Joint Checks - Clearing bank account as shown below.
In short, you have debited the Joint Check account with the deposit and credited the Joint Check account with the payment. So the net result is zero in this account. Your QuickBooks data file is correct because it has showed the payment from your Customer and the payment to your vendor.
I would like to comment on some of the articles you will find on the Internet on how to handle these types of checks. Many of them suggest you go into Preferences and change the setting "Use Undeposited Funds as a default deposit to account". They suggest you uncheck this box so the deposit can go directly in the joint check account. While in theory this works, in reality most QuickBooks users won't even have the security clearance to perform this action, not to mention it is just not necessary. There are many other reasons why I don't think this is a good idea but they are beyond the scope of this article. Suffice it to say if you follow the simple steps above your life and your QuickBooks file will be fine.