Use Payments just like you would if you are sending money to the vendor.  Run the report before posting so you know for sure which account it is being deposited to (Debit).  Remember a positive amount on a cheque takes money out of your bank (Credit).  A negative is just the opposite (Debit), it increases the balance of the account.

Hi Richard,

To add to this... If the credit payment from the supplier (which is by cheque) is recorded as a regular payment, just like you would if paying the supplier's invoice; how would I go about recording it so it shows in the undeposited cheques account. We use the digital cheque machine for depositing cheques. First it goes into an "undeposited cheques" account when I record a payment in Receivables and then I record the bank deposit and it goes into the banking account. 

TIA