Customer trade-in item and how to offset new purchase in a right way

uniqfidelity-gma · ‎February 12, 2024

I'm trying to do this right, and I'm only on Quickbooks Online Essential so I might be limited by the features due to my subscription.

Today, i've manually keep track of my inventory, and whenever i purchase goods, i make sure expenses to the supplier are accounted for in the "Inventory - Product" chart of accounts, when I make a sales, I create a journal by credit the "Inventory - Product" and debit the "Cost of Sales - Product" chart of account.

I do have request that wanted to trade-in their item, for example, I might be selling an item cost $1,000 but customer would want to trade-in their existing items which I will take at $200, and how do I account for this and issue them an invoice with the $1,000 items but have a separate line states the trade-in items at $200, so nett nett he/she is paying the difference on the invoice which is $1,000 - $200 = $800?

And this $200 my thought of it should be moved into another chart of account, says "Inventory - Trade-in", so when i make a sales of this trade-in items, i can create a journal to credit this "Inventory - Trade-in" chart of account, and debit the "Cost of Sales - Trade-in" chart of account.

My business is not high in volume hence i'm still doing this the way I described, I hope to account trade-in item as accurate as possible so would really appreciate some advise

many thanks

GenmarieM · ‎February 12, 2024

We appreciate you for posting your concern here at the Community,

You're correct in adding a line item with a negative amount to an invoice, then crediting your Inventory - Trade-in and debiting the Cost of Sales - Trade-in in the chart of accounts.

However, we can also consider creating a clearing account to keep track of the trade-in value and wait until the inventory item is sold or another transaction is recorded before moving the funds to the appropriate account.

If you're not sure, I suggest reaching out to your accountant to be guided in handling this matter.

Moreover, I'm adding this helpful article as your future reference in reconciling your accounts in QBO: Reconcile an account in QuickBooks Online.

Return to this post if you have other questions about customer trade-in items in QBO. I'll be here to lend a hand.

View solution in original post

Shania_C · ‎February 12, 2024

Thanks for sharing the details of your concern. I'm here to help you with handling your queries about clearing accounts in QuickBooks Online.

For your first concern. Yes, clearing account will serve as a landing zone for the trade items with their specific value. Additionally, you can add the negative line item for trade-in and use an asset account (for clearing account). However, since there's no money received yet, you can use other asset accounts.

To make sure you'll account for everything accurately, it’s best to reach out to your accountant for advice before you adjust inventory value. If you don't have an accountant, don't sweat it. You can find one here in our Resource Center.

Additionally, here are some articles that you can read to how to record journal entries also, learn how to set up and add accounts to your chart of accounts. in QuickBooks Online:

Please let me know if you have more questions or clarification with clearing your account in QuickBooks Online, I want to make sure everything is taken care of for you. Have a great day!

View solution in original post

GenmarieM · ‎February 12, 2024

We appreciate you for posting your concern here at the Community,

You're correct in adding a line item with a negative amount to an invoice, then crediting your Inventory - Trade-in and debiting the Cost of Sales - Trade-in in the chart of accounts.

However, we can also consider creating a clearing account to keep track of the trade-in value and wait until the inventory item is sold or another transaction is recorded before moving the funds to the appropriate account.

If you're not sure, I suggest reaching out to your accountant to be guided in handling this matter.

Moreover, I'm adding this helpful article as your future reference in reconciling your accounts in QBO: Reconcile an account in QuickBooks Online.

Return to this post if you have other questions about customer trade-in items in QBO. I'll be here to lend a hand.

uniqfidelity-gma · ‎February 12, 2024

Thanks for the quick response, I shall try and see how this works out and will report back

Rea_M · ‎February 12, 2024

You're always welcome.

I'm glad that my colleague was able to help you out today. If there's anything else that you need or if you have any other questions, feel free to post here anytime.

Thanks for being the best part of QuickBooks, and have a lovely day!

uniqfidelity-gma · ‎February 12, 2024

This is what I did:

Create a clearing account as suggested

Create a new product without value, but ties the product to the clearing account

I tried to create a dummy customer and issue an invoice with a new product value at $1,000, and add a second line in the invoice referencing to the new product created meant for trade-in, and put a -$200 to it, the invoice shown $800 which is accurate, and I crosscheck the clearing account did show $200 in it and not -$200.

Does it means?

1. I can do it this way, so I'll have the $200 trade-in item stays in the clearing, if this product eventually sold, I'll create a journal to credit this and debit into a chart of account which is sales of any traded in product, this clearing account sort of a landing zone for any trade-in items that hold specific value

2. Literally i just treat this clearing account as an inventory chart of account just like my other nett new product and continue to use the same way of credit/debit into the right chart of account through journal entry?

I'll be super appreciative if i can get a sense of if this is heading the right path. Many thanks

Shania_C · ‎February 12, 2024

Thanks for sharing the details of your concern. I'm here to help you with handling your queries about clearing accounts in QuickBooks Online.

For your first concern. Yes, clearing account will serve as a landing zone for the trade items with their specific value. Additionally, you can add the negative line item for trade-in and use an asset account (for clearing account). However, since there's no money received yet, you can use other asset accounts.

To make sure you'll account for everything accurately, it’s best to reach out to your accountant for advice before you adjust inventory value. If you don't have an accountant, don't sweat it. You can find one here in our Resource Center.

Additionally, here are some articles that you can read to how to record journal entries also, learn how to set up and add accounts to your chart of accounts. in QuickBooks Online:

Please let me know if you have more questions or clarification with clearing your account in QuickBooks Online, I want to make sure everything is taken care of for you. Have a great day!

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Customer trade-in item and how to offset new purchase in a right way