Forum Message

Recording a part-exchange

Hi,

I'm trying to figure out a way of recording sales where part exchange transactions are included as part of the sale. In our area of retail we often have customers who buy an item and offer an item of their own in part exchange. For instance, a typical transaction could be:

Item price: £100
P/X value given: £15
Total taken from customer: £85

Therefore, we have only taken £85 for the value of the goods sold and effectively purchased second hand stock with 'invisible' money.

I guess that we should record the actual amount received from the customer and record an expense for the purchase of second hand stock to cover the part exchanged goods, but which account should we use to say where the money to buy the second hand goods has come from?

It can't be cash in the till as this would affect the physical cash figure. It shouldn't really be attributed to the business bank account either as no cheque or bank transfer has been issued to the customer from this source of funding.

So what would be the best way to record this 'invisible' transaction? Is it a 'cost of sale' item?


Posted by Nick Lauro on Jan 13, 2010 2:50 PM GMT

Hello Nick,

If you intend to sell the item you receive from the customer at a later date, then yes, it's probably best to allocate the value of the item to Cost of Goods Sold. You should then periodically adjust the Cost of Goods Sold to account for changes in your inventory level, as described here:
http://www.solaraccounts.co.uk/help/how-to-track-changes-in-stock-level.php

Please note that I am not an expert on this topic - I recommend you confirm this information with your accountant.

If you are registered for VAT, you will need to record the sale as two separate transactions: Money Received followed by Money Paid Out.

If you aren't registered for VAT, you can record this on one Money Received transaction as follows:
Paid Into Account: Money to be Banked £85
From Account 1: Sales income £100
From Account 2: Cost of Goods Sold -£15

Regards,


Posted by Mark McLaren (Solar Accounts) on Jan 13, 2010 3:29 PM GMT