I want to know how it can happen if My supplier is also my customer and we have an agreement that because he pays me more than i pay him, he is just to pay the difference. For example, I pay him 500 on a monthly basis for rentals and then he pays me 650 on a monthly basis for a service i give him. how will the transactions be recorded in the system?
Look at the Guides. This is covered.
As @Tut said, this topic is covered by the guide — take a look at Handling situation where customer is also a supplier.