Customer/Vendor shared status

We often have vendors who are also customers, especially holding true from one division to another within our company.  While it is helpful to have these linked, sales is able to determine credit status easily, from an accounting standpoint, how exactly does this work?  Since creating the link essentially merges the records, can an invoice show up to offset a bill?

Right now, we are not using the link- keeping two separated records with the same info- one vendor- one customer.  Simple, straightforward- basic.  This requires that when moving credits and debits back and forth, JE's are required.  A little more work, but clean.