How do I trade services when my vendor is also my customer?

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This is called a barter transaction. In order to offset an amount due to a vendor with the amount that they owe you, do the following in QuickBooks:

Set up a clearing account. Go to Lists > Chart of Accounts, right click and choose New
Choose a bank type account and call it Clearing Account

A clearing, or wash, account is used to process unusual accounting transactions. It should always have a zero balance because transactions should go in and come out (wash).

Go to the Pay Bills window, Vendors > Pay Bills
Select the bill and then near the bottom, change the payment account to the Clearing Account and click Pay Selected Bills

Next, go the Receive Payments window, Customers > Receive Payments
Receive payment for the outstanding invoice in the amount needed, use Trade or Barter for the check number
Go to the Make Deposit window, Banking > Make Deposit
Deposit the “payment” into the Clearing Account bank account

Voila! You have correctly recorded the income and expenses. The clearing account should be zero after this transaction.

I hope this has helped! I would love to hear from you so leave a comment, ask a question, or just say “Hi”. Please share this or post a review for me: Google or ProAdvisor

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{ 6 comments… read them below or add one }

Joyce April 16, 2012

How do I receive a vendor credit and apply it against a customer invoice. I’ve read several posts from others on how to do this but I’m still confused. If you can be very specific, I’d appreciate it!

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Reesa McKenzie May 4, 2012: I’m not sure what you are trying to accomplish. If the vendor has a credit it means they owe you money, if the customer also owes you money then I don’t understand what you are trying to do! Can you give me a little more information? Is this a return of something that you originally billed the customer for and you want to reduce the customer’s bill?

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R E Johnson July 19, 2011