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I own a music store and trade in used equipment to give credit for new equipment or services such as repair. What is the proper J/E for this transaction?
USA J/E for musical instrument
- Thread starter Musicretailer1933
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It depends on what you do with the used equipment. If you refurb them for resale, they become a part of your stores inventory. If you donate them, they become a donation expense. If you sell them to a metal scrapper to be melted down, that's also inventory that turns into a stream of revenue.
The gist of the transaction is that you are modifying the debit portion of your debit-credit entry. Normally you would credit your revenue account to recognize your revenue and then debit the method of payment, ie cash.
But when you're accepting a used instrument as part of the payment, you'll have a credit entry to recognize the revenue and then a debit entry for the instrument that varies depending on where it goes. I would initially put that entry to an account called 'used inventory'. Then, depending on what you do with that asset, make a credit entry to reduce the inventory and a debit entry for whatever was done with the inventory.
The gist of the transaction is that you are modifying the debit portion of your debit-credit entry. Normally you would credit your revenue account to recognize your revenue and then debit the method of payment, ie cash.
But when you're accepting a used instrument as part of the payment, you'll have a credit entry to recognize the revenue and then a debit entry for the instrument that varies depending on where it goes. I would initially put that entry to an account called 'used inventory'. Then, depending on what you do with that asset, make a credit entry to reduce the inventory and a debit entry for whatever was done with the inventory.