Barter Transactions and the IRS/CRA
by Beverlee Zoll
Received vehicle in payment for work done
I need to know how to record the following transaction:
We are a painting business and have painted a client's home. In exchange, he has given us 2 vans that we will use for painting vehicles. I don't know how to record the transaction.
I need to account for the value of the vehicles received that we will use for our business and take pay off the accounts receivable invoice created when the work was completed to the house.
I would approach the "problem" by breaking the event into two separate transactions.
First create your invoice for painting the home:
DR Accounts Receivable
CR Sales Revenue
Next record the purchase of the vans at fair market value (FMV) ... assuming the vans FMV is the same price as the painting provided.
CR Accounts Receivable
Does that make sense Beverlee?
Here are some references to review as the IRS has specific rules concerning the accounting for barter transactions.
IRS Bartering Tax Center
Accounting For Barter Transactions
Barter Tax and Accounting Issues
http://www.allbusiness.com/accounting-reporting/corporate-taxes/1153-1.htmlP.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.