We had a former employee who cashed in his retirement. The check came to us. I need to deposit the check and then issue the employee a check for the same amount. When I generated a check to "customer" (former employee) it left a balance on his customer account, which I don't want.
What is the correct way to post this?

Just a thought - if you show the check you received from the employee's retirement account as a credit from the employee, and then issue him a check in the same amount they would cancel out. Remember the original check was an asset of the employee's that you received, just as if he had written you that check.