How to account for barter arrangements?

Regardless of the stage in business you are currently at, you’ll have come across the bartering system and the vast benefits on the hip pocket and goals. The only problem is, how do you account for this in your bookkeeping software?

Here’s how…

1. Create another ‘bank’ account in your chart of accounts called Contra Clearing Account.
2. When supplying someone with goods or services, prepare your invoice as you would normally.
3. Create a bill from your supplier as you would normally.
4. To clear both transactions out of the system, enter a customer payment against your invoice BUT deposit the money to your new Contra Clearing Account.
5. To then clear out the bill, create a cheque/check but write it from the Contra Clearing Account.
6. Now when you reconcile the Contra Clearing Account it should now be zeroed out (where goods/services are exchanged or bartered at the same rate.

To accurately track your sales and purchases you do need to record your barter transactions. In the case of Australian businesses you are also liable for the GST on these transactions too. Please check with your own taxation department for country specific rules.