[fortunatedave]

A company's CEO has a personal barter exchange account. He uses the barter account to purchase items for the business and also uses the exchange account to receive income from the business's customers.

When he spends money from the account, I believe the correct journal entry is a debit to the expense account (office supplies, for example) and a credit to an owner's equity/contribution account (I am using "APIC - Barter Transactions" to differentiate between personal cash expenses for company purposes vs personal barter expenses for company purposes.

BUT, when he receives income from customers - the credit is to Income and the Debit is currently to "Barter Bank Account". But because the barter account is his personal account, I don't know what to do with the balance in the account...

Any thoughts? (and, of course, he does not want to open a new barter exchange account just for the business... argh... )

Thanks
Dave

[morgaine300]

Wow - three in a row that I don't even know what you're talking about.

OK, first this is not homework, right?

Second, where are you? I've never heard of using a barter exchange account. I get the concept of bartering, but I've never heard of that account. Can you explain more about literally what is happening there? (i.e. not in accounting terms, but literally what you are doing)

I don't have a clue why you would be crediting an equity account for the expenses paid. What about the cash that's being paid? It's coming from some place. Seems to me if you're debiting this bank account when money comes in from a customer then you'd also credit when money is going out for expenses. It also seems to me that if the money coming in is from customers, which are customers of the business, then why this account belongs to the CEO.

I don't understand this concept.

[fortunatedave]

OK - I'll try to flesh out my description a little to help you help me...

The specific account he is using is called "Itex" - it's a barter exchange. See itex.com and it'll explain a bit. The owner of the business owns the barter account personally. He does not want an additional account for his business because of the fees involved. This is really no different than him having a personal bank account that he uses for the business.

What literally happens is this. He has a business need that can be met by somebody who also has a barter account. For example, a computer guy. So, he calls the computer guy, the computer guy comes to his office ,he does the work, and says "200 dollars please." then, the business owner calls Itex and says, "pay computer guy 200 out of my account." business owner's account is reduced by 200, computer guy's account is increased by 200, and at the end of the month they both get bills for transaction fees that are paid in cash or credit card.

So, the reason for the credit to the equity account is (I thought) simple. It is his personal barter account that he is using. If he used his personal cash for a business expense, my process would be to debit expense and credit equity. It's like he is contributing money into his business and then using that money to pay for the business expenses. It is coming from an account that does not belong to the business - but to him personally, so there's no need to touch the company bank account.

The transaciton that I want to be able to handle in his books is the income transaction - it's as if his customer gave him (personally) the cash to settle the customer's invoice. It's business income but is being paid first to a personal account. Because it is barter and not cash, there is not a corresponding transfer of money from the personal bank to the business bank.

Thoughts? Thanks for the help.

[morgaine300]

Sorry for the delay. I've been a bit spotty of late.

Even without looking at that site, I gather it'd just be like having a Paypal account or something.

Taking this through equity, while it can work, does not "feel" right to me. If you take it through equity for expenses, you'd have to take it through equity for revenues as well. You cannot do it two different ways like you appear to be doing it now.

Technically in a way, it's a sort of receivable. If the customer pays him, then he owes it to the company. Then if the company paid someone else, it would come back off. However, that seems a little non-sensical as well.

If it were me, I'd simply create this Itex account for the company and merely put the numbers through it that are the company's numbers. In other words, it would be like keeping two separate records for the same barter account, one for him and one for the company.

So for instance if there were $1000 in there, and $400 of it is his personal and $600 is company. And he pays a personal expense of $50. It comes off the $400 that is his balance and he'd have to keep track of that separately. But if then a $100 bill for the company was paid, then it would come off the $600 balance as a credit (just like a cash account) and debit the expense or payable. So it would be treated exactly like a bank account in a sense, but there would be two records, with numbers going to the appropriate record. And only the portion belonging to the company would be on the company's books.

You can still reconcile this each month by reconciling first each one separately, and then making sure the total comes back out to the actual total in the barter account.

That's how I would do it.

[fortunatedave]

Got it - thank you for the time you put into this - I appreciate that. Best to you.