My company did some financial work for a customer (i.e. mechanic’s shop) and billed them for $800 for services rendered. Currently this amount sits on my books identified as an “account receivable – trade out”……as we agreed that their payment for work I completed for them, would be traded out in mechanic services provided to my company. However, my company does not own a vehicle……said vehicle is owned by me personally.
The mechanic shop then did some work on my vehicle (titled in my name personally…..not the company) and the cost of this work was $1,200. I want them to use the trade to settle the $800 of this $1,200 amount (thus alleviating the trade completely) that I owe them for mechanic work done; and then bill my company for the remaining $400. I assume I will owe my company $1,200.
My questions are:
1. In a normal collection of an account receivable…..you debit cash and credit revenues. However, since this is a “trade out” transaction…….I’m a little confused on what to do. What are the accounting transactions (i.e. actual debits and credits) to do each of the following: A) Get rid of the $800 account receivable – trade out; and B) I assume this $800 is taxable and needs to show up in revenues; is it applied like any other collection of receivable even though it really wasn’t a “cash transaction” (don’t want my statement of cash flows to be incorrect) or is this handled some other way; and C) How do I reflect this transaction chain in expenses…..do I reflect the total $1,200 bill or the just the net $400….what are the actual debits and credits?
2) Once the above is done, should I show on the balance sheet an account receivable from owners’ for the $1,200 until it is paid back by me?