 0. Accounting Software. Barter Sale Transaction. Get ready to be an office hero with 0. Support Accounting Instruction by clicking the link below, giving you a free membership to all of the content on our website, broken out by category, further broken out by course. Each course then organized in a logical, reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel Practice Problems, PDF files, and more like QuickBooks Backup Files when applicable. Once again, click the link below for a free month membership to our website and all the content on it. We are in our custom zero home page going to scroll in by holding down control, scrolling up on the wheel at 175% zoom in currently, opening the demo company, but doing so by selecting the reset, which will refresh the data and open the demo company will then open our two major financial statement reports in a new tab. I'm going to close this out first by right-clicking on the tab, duplicating it. I'm going to right-click on the duplicated tab, duplicate again, go back to the middle tab, accounting drop down. We want to take a look at the balance sheet report tab to the right. We're going to the accounting drop down. This time we want the income statement or profit and loss report back to the first. Let's go to the second tab, change the date. So I'm going to hit the drop down. I want to change the date a bit on the customization for 2022. That looks good update. So that looks good. Okay. And so then I'm going to go back to the first tab. Now we're thinking about a bartering situation, one in which cash is not involved. Let's go to our flow chart over here to consider the process. Notice on the revenue side of things, usually at the end of the day, whether we have a cash based system or a cruel based system, we expect the cash to be going up at the end of the cycle on the vendor side of things. At the end of the day, whether cash or a cruel, we expect the cash to be going down at the end of the cycle. If we have a bartering transaction, we're just removing the cash and we're trading goods and services for goods and services. So you can kind of imagine a barter situation as if there were still cash involved, meaning you might say, okay, you give me the money for the goods and services I provide you and then I'll give you the money back for the goods and services you provide me. Clearly we don't need to really actually be giving physical cash in that situation due to the fact that we're just giving the cash back and forth. So we can remove the cash in reality, but we might set up the barter situation as if it's still going to end in a cash transaction so that we can use the same format for our cycles, the same forms, the same flow. What we'll do is we'll set up a cash type of account, which is really going to be a clearing account that will net out the increases and decreases to cash that we would typically have at the end of the process and will just net cash back out to zero. Now note you could do the same process using just the checking account and net out the cash back to zero, but you don't normally want to do that because the checking account needs to be tied to the check register. It needs to be tied with the bank reconciliation I mean. And so we don't want to mess up our bank reconciliation process. So what we can do is we can set up another account, which is a clearing account, which can be a checking account type of account. And then we can add the full accrual process, which is what I'll show here. You could try to shortcut it and try to do a cash based system. But if you used the accrual process, you can like track the outstanding balances for what is owed to you or what you owe to someone else, even though you don't expect to be receiving cash or paying cash, but rather expect to be receiving or giving goods and services in exchange. So we can enter, for example, on the sale side, the invoice and then we can track when the other the vendor, the other vendor provides us the goods and services and we can record the payment and then deposit into not the checking account, but the clearing account indicating that we have received payment in the form of goods and services provided to us. On the vendor side, we can do the same thing. We can enter a bill. We can track the outstanding accounts payable, even though we don't expect to be paid in cash. And then even though we don't expect to pay in cash, and then when we pay, not with cash, but with goods and services, we can then net that out to the same clearing account checking account, which will then net out. And that's how we might want to record it. So let's try that out. Let's go back on over here and let's say, okay, let's say we're going to barter. I'm going to enter the invoice first. So I'm going to say let's do an invoice kind of transaction. I'll just say it's services for services, although inventory, same process. You just have inventory that would be involved, but the forms will take care of the tracking of the inventory. That's why you want to do it this way because we can we can then track the forms will be used in the same way they normally would. So let's say this is going to go to a a a again, I'm just setting up a new one here, we're going to say December six, okay. And let's set up a new item on down below item. And I'm just going to call it service one item service one. And we'll say okay, the price, let's say it's $100. And obviously we would have to determine if we're bartering the relevant prices of the things that we're bartering for that's one of the uses of dollars is it's supposed to give us a measuring tool of what we're providing. So if you take the dollars out, you still need to have some form of saying well, I'm going to give you so much of what I have, like I'm going to give you this and you're going to give me whatever you're going to get, it still needs to have some form of measuring tool so we can determine that we're on a good basis. You always, no matter whether you're bartering or using cash, want to make sure that the deal, the negotiation between the parties is as clear as possible. Otherwise, just as any other partnership or deal or whatever, someone's going to be unhappy because their expectations are not being met. So we're going to say that we're going to say this is going to go then to sales, let's say, and we're not going to have any tax on it. You still may have tax implications on a bartering transaction. So clearly if you're using these types of forms, then you can implement whether or not tax is going to be applicable with the use of the forms as well. So I'm going to say okay, let's save that. And so what's this going to do? It's going to increase the accounts receivable. The other side's going to be going to sales. Let's approve it and check it out. So I'm going to go approve. Let's go to our balance sheet, update it. We got the AR and the A to the R accounts receivable. And I'm going to scroll all the way down accounts receivable. There's the $100 for the invoice. Let's go back to the form income statement update. And then on the income side on the sales item, scrolling all the way down. We've got the $100 here in revenue. Let's go back to the income statement. I'm going to go back to the first tab. We can of course also track this and like the sub ledger report, or we can go into our invoices and still track the open invoice, even though we don't expect to be paid in cash. So we could say, okay, we still have the open invoicing invoice that this is from AAA. So I know they're going to pay me, but with some goods and services that they're going to provide to us, we can also track it by going to the account to the contacts, customers. And then we can say, okay, AAA, this is my bartering person over here that they're going to pay me later. Now we could do the same thing on the bill side of things. So let's say that we're going to then process a bill. And so let's say and notice that if they gave us the the or let's say if it's a barter situation and we gave them the goods and services first, that's then we can track the fact that we gave them goods and services and we expect goods and services in return and track the accounts receivable. If on the other hand, they gave us the goods and services before we gave them anything, right, then we can enter the bill and track the fact that we owe them goods and services in return. That's why I'm doing this in kind of an accrual process. You could have a situation where the goods and services are exchanged at the same time. And you could still use this process or you might try to shorten it a bit by by just going straight to the cash type of transactions, money in, money out that are not going to the checking account, but the clearing account, which we'll get to shortly. But now let's let's do the same thing on the bill side of things. Let's say that they provided us goods and services. And we're going to say, okay, I'm going to enter a bill. Let's make this for BBB. And we're going to say, okay, bill. And let's just say they gave us a quantity of $100 that goes to the account of supplies or whatever supplies. You don't have a supplies account. For goodness, gracious sake. So what do we got here? Entertainment will go to entertainment. So they gave us some entertainment. So that so now we're this is going to increase the AP and the other side is going to the entertainment account and expense account. So we'll say approve it. And then let's go and check it out. Let's go to our balance sheet update. So now we've entered the liability side of things, which is going to be down here accounts payable A to the P accounts payable AP baby. And so it's like gravy baby AP. So we're going to go down here. There's the BBB. There's $100. Let's go back. And then I'm going to go tab to the right and update. And then we have an expense for entertainment. And we'll go into that. And scrolling all the way down. There's the $100 on that side. Okay. So so now I'm going to record the next component taken it out of let's start on the revenue side out of the receivable to us receiving receiving the payment on it. But to do that, I'm going to make another account which isn't going to be the checking account. I'm going to put put it into the a new clearing account. So in other words, if I go to the drop down here, and we go to the invoices, if we received payment on it, usually we would go into it here and say we've got payment. But it was paid to the checking account. No, we're going to put it into another account, a clearing account, which will then net out the two here, money in money out back down to zero. So so that's going to be the clearing account. So let's do let's set up another account first by going to the accounting. And let's go to the chart of accounts and set up another checking account. So I'm going to pretend that I'm connected to bank feeds because that's the way the system set up. So I'm gonna like, yeah, it's an American Express. But no, it's not really because I'm not going to connect it at all. And then I'm going to skip the bank feed because I don't want it. Don't connect to the bank poor five or the name is going to be clearing account for the checking a checking clearing account. And then or you might call it a bartering or trade clearing account, trade, just to distinguish it from any other kind of account trade, clearing account, trade clearing account. Let's do that. And I'm going to say boom, other, and we'll say a number because they need something there or they won't let me do it. And boom. So now if I go back to my accounting and chart of accounts, then now we've got our trading account there. So now I can finish the transaction. So now let's go to the business dropdown and go to invoices. And we're going to say, okay, they were going to say we got paid on this one with goods and services. So I'm going to say they paid us, let's say whatever same day. And then the paid to I'm not going to put it to the checking account but the clearing account. And then then trade or whatever. Add. That's not how you spell trade. Okay, I know I did that just to make the spelling people upset. So I'm going to go down and then we're going to say then now we've got that $100 in the clearing account. And obviously, we have a decrease in the accounts receivable, which is going to be reflected over here. And I can see that if I go to my contacts and customers, we can see in the AA that we've got this activity. And it's been paid off now in voice paid. Okay, so now we're going to say that that on the other side of things we provided the goods and services on the other side to complete the border transaction. So I'm going to go okay, let's go to the suppliers then. And or let's go to Yeah, there it is bbb. And so if I go into that, we're going to say there's the $100. So I could say, let's go and say, view the $100. And so there it is. So now we can make a payment down here. And we're going to say the date it's going to be the sixth again, let's say, and then once again, it's going from the trade account, that'll make it go back down to zero. And we'll just keep it at that and add the payment. So now the barter has been complete. If I go back to the account here, this account's going to disappear when I update it because it will have been utilized or completed or done. And then and then we had the barter took place. So now we've got this going back down to zero, accounts payable has gone back down from the form that we entered. And if I go back to the first half, we can see that in the activity here by going to the contacts and the suppliers. And we want to look for BBB. So now this one has been paid off. So it's bill has been paid. So that looks good. And we've recorded the transaction. So that's how you can basically do the barter. Now, if you don't want to track the accounts receivable and payable, you might be able to go directly after you set up your checking account to a receive money form and a spend money form, right? And once you net those two out to the to the clearing account, as opposed to going to the actual checking account, then you should be good. And just to note why that's important, note that the clearing account went back to zero. So you might say the checking account is overdrafted. That's why it's down here. You might say, why don't I just do the normal process as if I got cash into the normal checking account, it'll just go up and down the balance will remain the same. You could do that. But you don't really want to because it's going to mess up your reconciliation, because those two amounts are still going to show up on the bank reconciliation. And they're not going to be on the bank, because you didn't actually put them into the bank. So you don't really want to put added stuff, you don't want to use the actual checking account as a clearing account, because then the these transactions aren't going through the bank, which you're going to reconcile to we're not going to actually reconcile the clearing account to any bank account, because it's not being double checked by the bank. So that's why you don't want to typically use the checking account, even though it wouldn't have an impact on the end result in terms of the dollar amount in, you know, the checking account. So that's that is that.