Accounting for Tradeouts

You've got it right. You can also look up "barter" in Help, but there's really nothing more. Unless you buy specialized barter software, the only way to "link" your transactions is by using the Memo fields.

Also be aware that in most jurisdictions barter (or tradeout) transactions are required to be recorded at "fair market value" and are subject to all the same taxes as would apply if they were done for cash or credit.

We recently obtained a license to operate a local low power FM radio station, and will soon be soliciting "underwriting support" (aka advertising). Advertisers who pay us normally would pose no special accounting or data handling problems. But it's common for radio stations also to have advertisers pay in-kind (aka tradeouts.)

So suppose a local office supply shop pays for $100 worth of ads by giving us $100 worth of office supplies.

One way of entering this in QB could be to create a dummy cash account. Then we'd invoice the office supply customer for $100 of advertising. When we received the goods, we'd record a $100 payment to dummy cash. Then we could enter a "Vendor | Enter Bills" transaction for the office supply vendor, and record the bill as being paid for $100 from the dummy cash account.

Thus, when all the dust settled, we'd have the advertising revenue and office expense in the proper accounts, and a zero balance in the dummy cash.

This works. But the two transactions aren't linked. So after many such tradeout transactions, it might prove difficult to reconstruct which revenue was paid for by which expense.

Is there a more elegant way to do this?

Why not a simple journal entry?

And talk to your accountant. I don't think you want to call the transactions "advertising" and "office supplies." You really should be using categories like "donations" and "free-will offerings."

Nope! These are not donations or free-will offerings, they are payment in kind for a service rendered. As such, they should be treated like any other revenue, subject to the same tax liabilities as cash receipts. If the radio station's income is taxable then the fair market value of the goods received in payment for the services rendered (the advertisements) is taxable.

Because a J/E is not that simple. QB does not allow a J/E with both A/P and A/R accounts. You would need a combination of J/E crediting A/P under the vendor AND an issue of customer credit, or you might have a J/E debiting A/R for the customer AND an issue of a vendor credit, or finally, two J/E entries.

If it walks like a duck and quacks like a duck.........

We use QB 2005 Pro to run accounting for a non-profit museum - no problems to date.

We recently obtained a license to operate a local low power FM radio station, and will soon be soliciting "underwriting support" (aka advertising). Advertisers who pay us normally would pose no special accounting or data handling problems. But it's common for radio stations also to have advertisers pay in-kind (aka tradeouts.)

So suppose a local office supply shop pays for $100 worth of ads by giving us $100 worth of office supplies.

One way of entering this in QB could be to create a dummy cash account. Then we'd invoice the office supply customer for $100 of advertising. When we received the goods, we'd record a $100 payment to dummy cash. Then we could enter a "Vendor | Enter Bills" transaction for the office supply vendor, and record the bill as being paid for $100 from the dummy cash account.

Thus, when all the dust settled, we'd have the advertising revenue and office expense in the proper accounts, and a zero balance in the dummy cash.

This works. But the two transactions aren't linked. So after many such tradeout transactions, it might prove difficult to reconstruct which revenue was paid for by which expense.

Is there a more elegant way to do this?

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PT