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Community > Accounting >

Bartercard contra

Started by Amanda Milne -   in Accounting

Has anyone dealt with Bartercard Contra in their accounts?

If an organisation pays $10k for Bartercard dollars and they receive $45k in Bartercard dollars (the $45k does not hit the bank accounts), how do you deal with it in Xero? There would be a difference of $35k that does not align up if I was to complete contra on both side of the accounts (i.e income & expenses).
Does anyone know how to remedy this?

Thanks
Amanda
Hi Amanda

Set yourself up a new bank account called Bartercard - there wont be bank feeds but you can then pay invoices from this account and also receive payments into it by completing the payment section at the bottom of an invoice. You could use a spend money to take accounts of the fees.
 

Business Buddy  

Amanda - that's a really tricky one. You're effectively paying your bills at a discount for the next while. You could treat the $35K as income. But if it were part of the purchase of a business (the only way you are supposed to be able to "buy" T$) then it could be used to reduce Goodwill. Best to ask your accountant as it will have income tax and GST considerations to it.

BTW, you can get bank feeds for Bartercard, but they're pretty horrible IMHO. They only come through at the end of the month and you get 3 lines for each transaction (the actual transactions, cash fees and trade fees).
 

Peter McCarroll  

Hi Amanda

Yes simply treat Bartercard exactly the same as any other method of financing, such as a bank account or credit card account. The Bank Feed does work but at month end only and is the easiest way.

As a Chartered Accountant using Bartercard ourselves, and with lots of clients using Bartercard, it is really simple - treat Bartercard income and expenses exactly the same as cash income and expenses, pay/claim GST exactly the same, record income / profits / expenses exactly the same as if it were cash.

So, although your transaction is similar to acquiring say a stock item for $10k and selling it for $45k, that's a profit of $35k that would hit the P&L. However when the $T (Bartercard Trade Dollars) are spent on (say) accounting fees, stationery, cleaning etc in the business, these expenses are tax-deductible, and if all the $T is spent in the business, this ends up as tax neutral. Other than the cash saving by making these payments in $T instead of cash, that is a real cash profit the organisation has made and like any other profit, will hit the P&L positively.

You can contact me ianm@mhk.co.nz if you have any further queries on this.
 

Ian Malcolm