Sample journal entry a nonprofit will make in QuickBooks to properly record the barter transaction. Since barter is taxable income, both sides must recognize the fair market value of the goods/services exchanged.

This guide shows how to set up accounts and enter the sample journal entries for a barter transaction in QuickBooks Online (QBO).

Scenario:

• Tax preparation fee (FMV): $1,600
• Cash paid: $800
• Advertising provided (barter value): $800

Explanation:

• Professional Services Expense is debited for the full $1,600, reflecting the fair value of tax prep services received.
• Cash is credited for $800 — the amount actually paid.
• Contribution Revenue – In-Kind Advertising is credited for $800 to show the value of advertising provided in exchange.

This way:

• Expenses reflect the full value of services received.
• Income reflects the in-kind contribution (barter is treated as revenue).

Cash matches what was actually paid.

01

1) Set Up or Confirm Accounts

In QuickBooks Online: Gear icon (⚙) → Chart of Accounts → New.

Create or confirm the following:

• EXPENSE: Professional Services Expense — Tax Preparation
• INCOME (Nonprofit): Contribution Revenue — In‑Kind Advertising (or “In‑Kind Contributions — Advertising”)

Tip: In QBO, choose Account Type and Detail Type that best match (e.g., “Operating Expenses → Legal & Professional Fees” for tax prep).

02

Record the Barter

+ New → Journal Entry; Complete the lines as follows:

• Attachment: Upload the signed barter agreement (paperclip icon).
• Classes/Tags: If you track programs or grants, assign the appropriate class and/or tag.Save and close.

03

Optional: AR Workflow (If You Need an Invoice Trail)

Some firms prefer an invoice trail. One approach:

• Create an Invoice to the nonprofit for $1,600 (item linked to “Service Revenue — Tax Preparation”).
• Receive Payment for the $800 cash portion (deposit to Undeposited Funds or bank account).
• Enter a Journal Entry debiting Advertising Expense $800 and crediting Accounts Receivable $800; select the customer name on the A/R line.
• Apply the $800 JE credit to the open invoice (Customers → Receive Payment → locate invoice → apply JE credit).

Note: QBO item/credit‑memo workflows may restrict using an expense account on items. The JE method above keeps the accounting clean.

04

Verify on Reports

Nonprofit: Run Statement of Activity (P&L) → confirm

• $1,600 in Professional Services Expense,
• $800 in in‑kind contribution revenue
• $800 cash outflow.

05

Compliance Notes

• Barter is generally taxable to both parties at fair market value. Consult your tax advisor for specific reporting requirements.
• Consider whether any information returns (e.g., 1099‑MISC) are required based on the counterparty and facts.
• For nonprofits, present in‑kind contributions in accordance with your accounting policy and applicable standards.
• Attach the signed barter agreement to the journal entry for documentation.