 QuickBooks Online 2024, barter or trade transaction. Get ready and clear your mind because we don't overanalyze. We intuit with intuits. QuickBooks Online. Here we are. First a word from our sponsor. Yeah, actually we're sponsoring ourselves on this one because apparently the merchandisers they don't want to be seen with us but that's okay whatever because our merchandise is better than their stupid stuff anyways. Like our crunching numbers is my cardio product line. Now I'm not saying that subscribing to this channel crunching numbers with us will make you thin fit and healthy or anything. However it does seem like it worked for her just saying so yeah subscribe hit the bell thing and buy some merchandise so you can make the world a better place by sharing your accounting instruction exercise routine. If you would like a commercial free experience consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com online in our browser searching for QuickBooks Online Test Drive looking for the result that has Intuit.com in the URL. Intuit being the owner of QuickBooks finding the United States version of the software and then verifying that we're not a robot. Let's open up our financial statement reports like we do every time. Go into the reports on the left hand side we're going to right click on the balance sheet and open link in new tab right click on the profit and loss open link in new tab. Let's check out those tabs up top closing up the hamburger here is our balance sheet tabbing to the right closing up the hamburger here is our profit and loss back to the first tab this is the setup process we do every time data input in the first tab looking at the results of that data input on the reports in the tabs to the right selecting the drop down and prior presentations we've been looking at the customer cycle remembering that customers for the purposes of QuickBooks means the side of the table in which money hopefully is coming in for goods and services we provide to the customers prior to that we looked at the vendor cycle and the vendors for QuickBooks means that we're paying someone else meaning we're the customer of the vendors money ultimately going out for goods and services we're we're purchasing for our business now normally the the common thread through all the cycles will be cash that's why when I go to the balance sheet and I look at the checking account you're going to see much more variety in terms of the transaction types going through the cash account than any other account because the cash account is the lifeblood of the company it's kind of oiling the whole process however I'm going to go back it's possible that we do have a transaction that doesn't have cash involved like a bartering type of transaction so we're going to provide goods or services and some other business is going to provide will say equal and opposite goods and services and they will basically net out against each other now how can I enter that into the QuickBooks system because if we do that we should still be recognizing income it's not like if you think about this from a tax perspective in the united states we have to pay income taxes it's not like you can avoid income taxes by just getting paid by something other than cash you'd say well I didn't get any cash we just bartered well you still the tax people will still say the iris will still say that you owe them money right we should still be recording the transaction and recording the revenue but how exactly are we going to do that because there's two cycles are designed to have cash involved at some point within the process of the cycle now note you can basically think of a barter transaction as though cash was affected and then take out the cash so for example if I'm selling goods and services and I have sell guitars or something and I sell a guitar to someone else it's a restaurant they're going to give me a bunch of free meals or something for for the guitar then I could say well when I sell the guitar if I sold it for whatever a hundred dollars then I would receive the hundred dollars when I sell the guitar and then when I get the free meals or the meals for the guitar I'd pay back the hundred dollars right the barter in essence is just removing the fact that the hundred dollars is going back and forth and we're just eliminating the hundred dollars and there we have the barter transaction but if you think about that in QuickBooks we can do the same kind of thing in QuickBooks but add it as though cash was being impacted so we'll just take it in and out of a clearing account instead of the checking account in other words if I go to my balance sheet and I think of a barter transaction I could still enter you can imagine I don't want to enter it into the checking account this way but you can imagine doing it where you could say I'm just going to record an increase to the checking account even though I didn't really get any money and then I'll record a decrease to the checking account for the two sides of the transaction the revenue side and the expense side it will increase and decrease the checking account now we don't actually want to do that with our main checking account because it'll mess up the it'll clutter up our checking account and the checking accounts the most important account to kind of track and it'll mess up our bank reconciliations therefore we would like to have some other account if we're doing a lot of bartering transactions that will just be a clearing account it will go up and down and just track the clearing account and so I'm going to make another account here in that will be a checking type of account because I want it to be able to act as a checking account because those are the accounts that are designed to to map to these forms in the two cycles but I'll make it a clearing account it's not going to be connected to any bank feeds or anything like that let's try that we're going to go to the transactions tab and we're going to go into our chart of accounts on the right chart of accounts closing up the hand boogie and let's just make a new account so I'm going to say a new account and I want to make it a bank type of account so it's going to be a bank type of account and it's going to let's say it's a checking account and select account under the checking account actually let's not put it under the checking account let's delete that and we're just going to save it under bank accounts so it's under bank accounts I'm going to call it the barter clearing account barter clearing account so no other description necessary so there we have it let's save it and it's going to say it needs a tax field so I'm just going to say checking account for the tax form section which I'm not going to worry about too much at this time I'm going to save it and so there we have it so now we've got our another checking account that we can use as our barter account so let's hit the hamburger up top plus button now we can start at either side of the bartering transaction the barter might have happened at the same time in which case you can either you know enter the the customer side or the expense side however the barter might be more extended in time meaning you might provide someone something to someone else and you want to track that they owe stuff to you in return and you can kind of track that and in that case you would record you know the customer side first and then the vendor side let's start it with the customer side now note if it was a barter that happened at the exact same time then you might not enter an invoice and then receive payment but rather go straight to like a sales receipt type of transaction or possibly even use a deposit form but I'm going to do the full service accounting system for the barter transaction so we'll record this side the invoicing side so I'm going to imagine that we invoice a client for a trade type of transaction but we're still going to enter an invoice for it so I'm going to say this is going to be customer number one tab tab tab tab and let's say this happened in 2024 010524 and then let's make an inventory item just to make it a little bit more complicated inventory let's make it just item number one I'm going to make up a new item number one and we'll make it an inventory item there it is inventory and it's going to call it item one just like we've seen in prior presentations I'm going to say the quantity on hand I'm going to add some quantity on hand saying there's 10 on hand like we've seen in the past that'll make a transaction increase in the amount on hand I'm not going to put a reorder point the asset account will be inventory when we track it in a perpetual inventory system we're going to sell it for let's say $130 to the sales of product income it will be taxable here and the cost of it we're going to say is $100 cost of goods sold boom so let's save that so what's this going to do well it's an invoice so it's going to be increasing the accounts receivable but by the full amount plus the sales tax 140 the other side is going to go to revenue of the 130 and then we're going to have the sales tax increasing the payable of 1040 sales tax payable liability account and then inventory is going to go down by the $100 that we put the item cost for cost of goods sold it's going to go up by the 100 net impact on net income 130 minus 100 or the $30 and the sub ledger for the for the customer will be going up that being customer number one and the sub ledger for the inventory will be impacted so let's go ahead and save that we've seen that in the past let's save it and close it and let's check it out so if I go to my balance sheet and run it we can see if I go into the accounts receivable the ar we have then let's bring it back and let's bring the date up to 2024 from 010124 tap 123124 tab run it to refresh it see if we can get the proper dates here for crying out loud and then it didn't it's not there where did it go let's refresh it again run it to refresh it and then go into the ar and check it out there it is there's the 140 accounts receivable back let's go to the income statement scroll up go from 010124 tab 123124 on the range run it there's the 130 not including the sales tax back to the balance sheet the sales tax is going to be down here in the sales tax payable board of equalization that's who we owe for the sales tax boom and then back and then we know the inventory is going to go down our main focus isn't inventory right here but just to get an idea of the more complex scenario there's the $100 that went down by and the cost of goods sold over on the income statement also went up by the 100 net impact on net income 130 minus the $100 gives us the $30 impact let's also go back to the balance sheet scroll up and we want to focus in on this accounts receivable sub ledger let's go to the tab to the right right click on it i'm going to duplicate that tab so i can open up the sub ledger for accounts receivable in report format go into the reports on the left hand side scrolling down we want who owes you and let's go down to the customer balance detail report close up the hand boogie and so there we have it so we have the customer one the 140 the total of this report 599192 tying out to what's on the balance sheet which is the the hold on a sec k posseau here this should be the balance sheet 542192 542192 okay i think i just went dyslexic there for a second but that's okay all right so then if i go internally and i go down to the sales down here then i can track that as well here or in the invoices or i can go into my customer and i can go into my customer number one and there's my 140 here so now we can track the accounts receivable just as we normally would accept that we expect to get paid with a barter transaction instead of a instead of a cash transaction right and then if we did this on the other side let's just do the other side of the transaction would be on the vendor side where we can enter a bill if we did the full transaction or an expense or check form but i'm going to enter start it with a full transaction on the bill and let's say this was for vendor number one tab we're going to add the new vendor and we're going to just say that the bill was let's say on the same date and let's say that it was on the category that we're purchasing i'm just going to say it's expense some kind of expense if it was meals there would be you know meals and an internet expense i can't one i can't spell expense right now i don't know what is wrong with me tab and we'll set it up with and expenses i'll just call it expense one other business expense and save it and we're going to say for it's for the same amount we'll say 140 and 40 cents which includes the sales tax that we had when we on the other side of the transaction so what's this going to do well it's a bill form so it's going to increase the accounts payable and the other side's going to go to the expense of the expense one that we set up so let's go ahead and it's going to track the bill by a vendor let's save it and close it so if i could then go to my balance sheet and i run the balance sheet we can then go into the accounts payable down here the ap and we can track the accounts payable of the 140 going back the other side went to the profit and loss so if i go into my profit and loss and run the profit and loss there's the 140 and then we can track that with another sub sub report if we wanted to buy vendor that should tie out to the vendor payable and we can track it internally if we so choose by going to the expenses tab and i can go to my expenses or bills or i can just simply go to my vendors and i can be tracking uh in here with vendor number one and here's vendor number one with the bill okay so now if we paid the bill we provided the goods and services then we can we can go ahead and say the next step on the bill would be to pay the bill and instead of going to the checking account or to a master card account we're going to take it out of the barter account that's the key because these two transactions i misspelled clearing account these two transactions are coming out of the barter accounts let's make this as of uh 0506 uh 2 4 and i'm going to just pick up that vendor one and so this is going to decrease the account the cash account but it's a clearing account that it's going to be uh decreasing and the other side's going to decrease the accounts payable so we'll save it and we'll say okay if i go back to my balance sheet then i can run this and we can say then the accounts payable down here if i go into my accounts payable as going back down the sub ledger has gone back down and then if i go back up to the barter account now i have a negative 140 40 in the barter account so that's going to sit there until i do the other side closing this back out and then i can go to the other side of the transaction close this out you could see by the way in the expenses tab vendors vendor one you could see it's basically netting each other out in here and then i can go to my sales side of things and i can finalize the customer item here and we can say that we're going to receive a payment and once again it's going to be here let's make it on the sixth as well and the payment method we could say we could make another one say other so trade instead of barter so i don't misspell it again and then it's not going to go into undeposited funds here i could go in and out of undeposited funds but i'm just going to go directly into the barter account and so what's this going to do is going to decrease the accounts receivable and then go into the clearing account which should take the clearing account back down so let's go save and close and so there there we have it if i go into my balance sheet and run it you could see the barter account has gone back down to zero they've net it out and this is once again where you might say why don't i just take it in and out of the checking account because these two will be messing up and be messy in there it'll come to the same balance but it'll be difficult to match this out to the bank feeds and to reconcile because of those items so you don't typically want to do that put it into the clearing account works fine and then we can go down and we can say that the accounts receivable has now been tied out the sub ledger for the accounts receivable should still work here if i look at my sub ledger then running that report customer one is gone because we paid off the invoice five two eight one fifty two ties out to the five two eight one fifty two if i go into the first tab and we look at the sales and we're looking at that customer then of course we can see it paid off just as it normally would just paid out of a bartering type of transaction now note we did that with the full accrual system invoicing and and the bills you might be able to make that a little bit faster by using like a sales receipt for example uh let's take let's take a quick look at it oh and a sales receipt in an expense form or something like that notice over here just take a quick look at it on on the comparison of what might happen like normally if cash was taking place with these transactions and you had two separate transactions what would happen is you would have the invoice the invoice would be and and let's make this a more simple example instead of selling inventory i'll just say we're selling services for a hundred dollars or something so normally we would invoice accounts receivable let's say it was a hundred dollars it's going to revenue and we're going to say that would be the credit for a hundred dollars right so the receivable would go up for 100 and the revenue would go up in the credit direction for 100 net income is increasing by the 100 in that case and then and then if we receive payment so receive payment on the invoice the receive payment form is going to i'm going to put it directly into the checking account instead of undeposited funds and then the other side's going to come out of accounts receivable for the 100 dollars so now it's going to say all right cash is going up for 100 accounts receivable goes back down and then on the other side of things on the bill side of things we would enter this is if cash was involved right we would enter the bill and say okay well the bill is going to be then the the bill is going to be the accounts payable and an expense expense and then accounts payable for 100 dollars because this is equal and opposite transactions the expense is 100 dollars and the accounts payable liability is 100 dollars notice it nets out on the ballot on the income statement we still want to record the income and expense even though it nets out because we want to have both of them showing on the two line out of income and expense even though it nets out to the uh zero and then we would pay the bill pay bill and form and that would be then we're going to take down the accounts payable and it's going to be coming out of cash so 100 negative 100 so accounts payable goes down and then and then cash goes down so you could see what happens it comes out here now you might just say so then the bartering transaction would be like well why don't I just eliminate the cash involved because because it's a barter I don't need to say take the 100 dollars and give it back and forth that's what we're doing here but let's copy this whole thing and I'll put it over here and let's just do the same thing but with a bartering transaction so in a bar so all we did to to adjust this is we just said instead of taking this cash account I'm going to delete this whole thing we're going to change the cash account to this to a clearing account and then we just set up the the exact same thing imagine in cash to be involved right so now the accounts receivable is going up accounts receivable is going up income is going up and then when we get paid I'm not going to put it into the checking account I'm just going to put it into this clearing account because we got paid with a bartering transaction and so but I still want to just record it as if it's the same thing because that's how my forms are set up and then so we put it into here and we take it out of the accounts receivable and then we have the expense down below and the accounts payable and the accounts payable and then you and then we decrease the accounts payable and it comes out of the clearing account comes out of the clearing account and you can see we end up in the same spot as we did before but now it's just going in and out of the clearing account so we don't clutter up our clearing account now just one more thing I know this is I'm doing a lot of stuff in excel here but notice that you could do this the same kind of concept if you didn't want to track the whole invoice in the bill possibly with just like an expense form so we might say expense let's call it a a sales receipt form so it's a so it's an accrual based method I mean it's a cash based kind of method so we don't do the two steps we and we don't have to track the the accounts receivable and accounts payable and the sales receipt like kind of like what you do is a check at a check register would be then increasing not cash but again I'm going to put it to the clearing account and then the other side is going to go to income and let's say that was for the hundred dollars and then on the other side it would be an expense form an expense form we're going to say is going to be going into the expense and then the clearing account for the hundred dollars so this way I'm not tracking the AR and and and and accounts payable so now I could just say okay clearing account went up with the sales receipt 100 dollars income went up 100 dollars the expense goes up 100 dollars making net income net down to zero and the clearing account goes back down right so so you could do it that way too and you can you can start with the sales receipt or you can start with the expense whichever whichever one you want let's do that over here real quick see if I can do that real quick over here if I did another one and I started let's make an invoice we're gonna say this is a what wait not an invoice that's the point let's make it a sales receipt this time and let's say this was for customer number two and we'll say save that and this happened let's say on the 15th and let's make this a service item this time I'm gonna say new service item so we're two restaurants trading meals or something and then we're gonna say it's a service item sales price hundred dollars sales tax let's remove it to get rid of that complexity for this time round no sales tax save it and close it so a hundred dollars this is going to increase not undeposited funds but I'm going to put it into the clearing account which is misspelled uh and then I'm going to say this is going to increase the clearing account the other side is going to go to revenue let's save it and close it we're going to say save and close balance sheet I can run it and we're going to say all right the clearing account went up by 100 so you can still track if this clearing account isn't zero then that's an issue but we're not tracking it over here in the sales side it's not going to be tracking in accounts receivable so this would be an easier transaction because right because I've recorded it as though it's already been paid so this would be an easier transaction if your barter happened at the same point in time right and then the other side I can go as it's an expense form and let's say this is going to be vendor to vendor to tab save it and then this is coming out of once again the barter account and we're going to say that this is going to be uh expense we'll just say expense one again so a hundred dollars so this will do the same thing it's going to uh increase the expense and it's going to decrease this time the clearing account let's check it out balance sheet run it clearing account back down to zero that's what it does it clears out clears out all right and so okay let's go back on over it's not recording that second one even though it's zero here let's go back in there again and so there it is did I put that second one on the right date because I don't see it in here okay there it is I refreshed it again so there it is uh so we've got these two netting out and then if I go back on over and if I go to the income statement and run that one we saw the service item is a hundred here and then the expense is within this expense transaction of uh 100 in here so it nets each other out so that's the general concept with a with a barter transaction you can kind of imagine as though cash was involved you can treat it as though kind of cash is involved you can track it through accounts receivable and accounts payable and a similar kind of process however you don't want to go to your actual checking account because again it'll muddy up your checking account making it difficult to match to the bank feeds and do bank reconciliations