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Optimal Accounting Practices for Barter Transactions

Apr 15, 2024 5:29:39 PM Kathy Dise Small Business, Financial Management, Bookkeeping, small business bookkeeping, Quickbooks Bookkeepers, Virtual Bookkeeping Services, Quickbooks Set Up Services

Optimal Accounting Practices for Barter Transactions
Optimal Accounting Practices for Barter Transactions.

Are you an attorney who does work in exchange for IT services? Maybe you are a physical therapist who exchanges services with someone who does your social media. These are great examples of bartering.

How do you account correctly for bartered transactions? When accounting for barter entries, enter the amount of revenue and expense recognized from each barter transaction on the Income Statement during the period that the barter occurred.

Clearly label all barter income and expense transactions in QuickBooks. In addition, clearly mark all supporting documents pertaining to the barter transaction. These can include the sales receipt and the invoice and barter exchange statement. This will support the fair market value used in accounting for the barter transaction.

The annual fair market value of barter transactions is reported on the "Proceeds from Broker & Barter Exchange Transactions" line on Form 1099-B. According to the IRS, "The fair market value of goods and services exchanged must be included in the income of both parties."

Example (1): A doctor performs a medical visit in exchange for an accountant’s tax return prep.


Debit: Accounting Expense xxx

Credit: Medical Income xxx 

(at the determined fair market value of the accounting services received)

Example (2): A fitness trainer performs physical training in exchange for (personal) dental work.


Debit: Owner’s Draw xxx

Credit: Fitness Income xxx

(at the determined fair market value of the dental work provided)

What other questions or challenges do you have about accounting for barter exchanges? Share them in the comments below!

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Kathy Dise

Written by Kathy Dise

Kathy has over 30 years experience helping small businesses succeed. As a commercial lender, commercialization expert and now as a QuickBooks diamond level advisor, Kathy understands the challenges small business owners face. Her experience helps business owners quickly accomplish their financial goals. As the owner of BudgetEase, Kathy works with clients to develop a plan to efficiently process 1,000s of small transactions so owners can make informed decisions. She lives in Shaker Heights, OH with her husband Ralph and enjoys golf, curling and walking in Cleveland’s fabulous Metro Parks.