How to Handle Barter Transactions In QuickBooks Desktop
Create a bank account called “Barter”. In between barter transaction postings, it’s a good idea to make this account inactive. Also, in between posting groups of barter transactions, the balance in this notional account will be $0. (The account register colour for the Barter bank account should be a colour that is different from existing real bank accounts on the chart of accounts.)
You have a customer who is also a vendor. Let’s call that company SmithCo. On the vendor list, SmithCo will have the vendor name “SmithCo (v)” while the company name will be just “SmithCo”. On the customer list, SmithCo will have the customer name “SmithCo (c)” while the company name will be just “SmithCo”. That way, any correspondence received by SmithCo from you out of QuickBooks will just show the name Smithco without the (v) or the (c) indicating which type of contact is being used.
Case #1: let’s assume that you owe SmithCo (v) $1000 and SmithCo (c) owes you $900. Therefore the payable is greater than the receivable.
Make sure the Barter bank account is active.
Customers > Receive Payments….Receive the $900 (the lower of the 2 amounts) and use the payment method of “Barter” (create a new payment method or use the payment method of “cheque” and use the cheque number “Barter”). Make sure the $900 goes into the Barter bank account. The Barter bank account balance is now $900.
Vendors > Pay Bills…Pay $900 of the $1000 owing from the Barter bank account with a cheque number “Barter” …the balance in the Barter bank account is now $0.
You can now reconcile the Barter bank account, if you wish, so that the reconciled balance is $0 and you can checkmark all transactions in the reconciliation window, as long as the difference in the bottom right corner is $0.
Make the Barter bank account INactive.
Now the amount owing to SmithCo (v) is the $100 left.
You can then pay the $100 outstanding to SmithCo (v) from the REAL bank account.
You can also show the Vendor Balance Detail for SmithCo (v) & Customer Balance Detail for SmithCo (c) if there is any question from SmithCo about the account.
Case #2: let’s assume that you owe SmithCo (v) $500 and SmithCo (c) owes you $600. Therefore the receivable is greater than the payable.
Make sure the Barter bank account is active.
Customers > Receive Payments….Receive the $500 of the $600 receivable (the lower of the 2 amounts) and use the payment method of “Barter” (create a new payment method or use the payment method of “cheque” and use the cheque number “Barter”). Make sure the $500 goes into the Barter bank account. The Barter bank account balance is now $500.
Vendors > Pay Bills…Pay the $500 owing from the Barter bank account with a cheque number “Barter” …the balance in the Barter bank account is now $0.
You can now reconcile the Barter bank account, if you wish, so that the reconciled balance is $0 and you can checkmark all transactions in the reconciliation window, as long as the difference in the bottom right corner is $0.
Make the Barter bank account INactive.
Now the amount owing from SmithCo (c) is the $100 left.
You can then receive the $100 outstanding from SmithCo (c) into the REAL bank account.
You can also show the Vendor Balance Detail for SmithCo (v) & Customer Balance Detail for SmithCo (c) if there is any question from SmithCo about the account.
EFK’s favorite time-saving hack using QuickBooks Online in Chrome
The MacGyver-esque Way to Handle Barter in QuickBooks Online
For an NSF cheque received from a customer, here’s a slick way to handle it.
Let’s assume that you already received a payment and deposited it into the bank in QuickBooks, to match what you did in real life. Then the bank took the amount of the cheque (and perhaps a service charge) out the bank to reflect the fact that it was NSF. Here’s what to do from that point forward:
Click on Cheque as if you’re writing a cheque to the customer (or job of a customer) which bounced the cheque on you. For the cheque number, put NSF and then the cheque number that was bounced. (e.g. If they bounced cheque #123, call it NSF123). Put the amount that came out of the bank as the amount of the cheque. If the bank charged you a service charge and you are going to charge the customer for that amount, make the amount of the cheque include the bounced amount and service charge. Put the date that it bounced as the date of the cheque.
Specify what happened on the memo line of the cheque. Then for the account, put it to “Accounts Receivable”. (If QuickBooks prompts you for a name in the “split” line, re-enter the name of the Customer or Job that bounced the cheque in the Customer:Job field.) That takes the money out of the bank on the date that it bounced, and puts the money that bounced back into Accounts Receivable. Optionally, edit the original receive payment (cheque #123) so that the amount originally received is applied to the new invoice, and that will preserve the aging of the first invoice. Then you can “receive payment” again on the second cheque that the customer gives you..
Stamp out Employee Fraud and Embezzlement
No company should allow the same person that is printing the cheques to reconcile their bank accounts. Having another person perform the bank reconciliation is a built-in safeguard against employee fraud and embezzlement.
