Handling Barter Transactions in QuickBooks

We all remember Schoolhouse Rock on Saturday mornings, right?!? Catchy tunes to help us little kids grasp “adulting” concepts like how a Bill becomes a Law, or what a conjunction is. One of their cartoons revolved around the concept of Barter. “Trading this for that” was in simplest terms of what barter actually is, but how do you account for that in your QuickBooks? Well, read on….

Recording barter in QB requires a few things to be set up first in order to track it properly:

• Vendor – a person or business you purchased something from
• Customer – a person or business who purchased something from you.
• Invoice – Sales transaction to record what your customer bought
• Bill – Purchase transaction to record what you purchased
• A Barter Account – A “bank” account so you can record the payment of the trade

STEP 1: Set up the Barter Bank Account – In order to set up the Barter Account:

1. Go to your Chart of Accounts.
2. Select New to create a new account.
3. Under the Account Type ▼ drop-down, select Bank.
4. (QBO only) Under the Detail Type ▼ drop-down, select Cash on hand.
5. Enter the account name. (ex. Barter Bank Account)
6. Select Save and Close.

Once you have the Barter Bank Account established, this will be the “clearing” account which you will manage the trade. The balance of this account should always be $0.

NOTE: You will need to have the vendor and the customer be slightly different since QB does not allow you to have duplicate names. Adding “Inc,”  middle initial, or simply the letter “V” are common practices.

STEP 2: Record the sales and purchase transactions

Create an invoice

1. Create new Invoice.
2. From the Customer ▼ drop-down, select your vendor’s (barter partner) name.
3. Enter all the necessary information.
4. Select Save.

Create a bill

1. Create a new Bill.
2. From the Vendor ▼ drop-down, select your barter partner.
3. Enter all the necessary information.
4. Select Save.

Step 3: Record the payment of the barter trade – NOTE: If your business operates on a cash basis, the invoice payment and bill payment should both be dated with the same date as the invoice or bill.

Receive payment for the invoice

1. Create a new Customer Receive Payment.
2. From the Customer ▼ drop-down, select your vendor’s (barter partner) name. Note: The details and info from the invoice you’ve created earlier will appear under Outstanding Transactions.
3. Fill in the date and amount.
4. Select the Payment method ▼ drop-down, then Add new.
5. Enter “Barter” in the Name field, then select Save.
6. Select the Deposit to ▼ drop-down, then select your barter bank account.
7. Select Save and close.

Pay the bill

1. Go to Pay Bills.
2. From the Payment account ▼ drop-down, select your barter bank account.
3. Select the bill you’ve created earlier.
4. Select Make payment under Balance Due.
5. Enter the amount.
6. Select Save and close.

You now have a record of the exchange. If the exchange of goods isn’t equal in value, the invoice or bill will show a balance due or credit which you can handle through normal payment methods.