Accounting of Sales under barter system

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This query is : Resolved

V.Jagadeesan (Querist)

18 April 2009 Dear Members
A company engaged in Jewellery business. Some customers sold old gold against which they purchase new Jewellery. Suppose old gold worth of Rs. 1,00,000 is sold and purchasea new Jewellery worth Rs. 1,20,000.

In the sales invoice Rs. 1,50,000 is shown as sales against which value of old gold is shown as deduction and the balance amount of Rs. 50,000 shown as amount received.

I request you inform me how to account the above transaction. Whether the gross value of Rs. 1,50,000 is to accounted as sales and Rs. 1,00,000 is to be accounted as purchase or is it sufficient that the net amount of Rs. 50,000 is alone to be accounted as sales.

Manmohan ACA, CS

Manmohan ACA, CS (Expert)

18 April 2009 gross value of Rs. 1,50,000 is to accounted as sales and Rs. 1,00,000 is to be accounted as purchase.

CA RAMESH KUMAR AHUJA

CA RAMESH KUMAR AHUJA (Expert)

18 April 2009 I think this is not a barter transaction. Barter Trade means exchange of two different type of goods. In the given case old gold ornaments are exchanged with the new ones by paying for making charges. The amount settled for Old Ornaments is the value of standard gold contents in the jewellery. It is like issuing of Standard Gold for making of Ornaments. As such, the net amount may be booked as Sales.