In the world of cooperative/radical/generally crunchy bookkeeping, you may find yourself wondering how to post a transaction that involves barter. Because until the revolution comes we still need GAAP.
Say for instance that Topher is dog-walking for web designer Merrie while Merrie designs Topher’s website. They agree that Topher will barter for the web design. Merrie invoices Topher for design services amounting to $200. In the meantime, Topher has provided $200 worth of dog walks, for which he invoices Merrie. You are Merrie’s bookkeeper. The name of the dog is not pertinent, but is Peppermint.
- Create an asset account called Bank Clearing. If possible, set this up as a “cash” or bank account in the general ledger.
- Post Merrie’s invoice to Topher. Two hundred dollars is thus recorded in revenue.
- Post Topher’s bill to Merrie. You have thus recorded a $200 expense.
- Pay Topher’s bill, using Bank Clearing instead of the usual cash account. This clears the liability from Accounts Payable and creates a negative ($200) in Bank Clearing.
- Receive a payment against Merrie’s invoice, again using Bank Clearing instead of cash. This clears the receivable and zeroes out Bank Clearing.
The fun of this comes when you are bartering your own bookkeeping services and therefore have to run through all of the above steps twice—once in your client’s books and once, in the other direction, in your own.