Barter is not a dirty word!
During 33 years servicing business clients, we have encountered many questions and concerns. One question that pops up regularly is: Is bartering legal? The answer: of course it is. What about accounting for these transactions? Does the IRS care if I barter?
A business transaction is the exchange of one item of value for another. Not all transactions are in the form of cash. Some are charge accounts, credit cards, checks, or trade of goods and services (barter).
To illustrate the recording of a barter transaction. An accountant is performing on going services for your retail store. You and your accountant agree that both of you provide a product that the other uses and decide that barter might be an advantage for you both. The accountant purchases $400 of your product. You record the sale of $400 of product and the amount your accountant owes you, as an accounts receivable, for the purchase.
The accountant has just completed a project for you at a cost of $250.00. You will record the accountant’s bill on your books by reducing the amount owed to you by $250.00 and increasing your accounting expense by $250.00. Now your books show that the accountant still owes you $150.00. The balance can be paid to you by the accountant or left on your books to be cleared by another project.
The bottom line, both of you have covered necessary expenses with “cheaper” dollars. Each has acquired a needed product or service with the cost of producing their product rather than with the full outlay of cash.
Some examples of barter items we are currently interested in include: Painting and repair of store front; Small shed roof, Residential Eave Trough repair, New wood stove, residential chimney repair, Small Kitchen total remodel, replacement of attic blown in insulation, lawn services, window replacement, and much more.