First aspect is dealing with how to provide credit for the trade-in item in the sales receipt. Easy answer is to say just add line for trade-in item show amount as negative. Well how to setup that item in product/service? If you set it up that trade-in item as Inventory item, it will not work. It will mess up COS and few other things. We will need to create that trade-in product as non-inventory item and create another entry to add-in quantity and cost to inventory.
For this example, let us say you are in cellphone business. You’re selling one unit of iPhone for $600 and offering $150 trade-in credit for used Samsung Galaxy phone. And, customer is paying $450 plus tax by check.
Step # 1
You will need to add one new account in the Chart of Accounts.
To add new account in Chart of Accounts:
From the home page screen
- Select the Company Gear (located at upper-corner)
- Select “Chart of Accounts” under Settings header
- Select blue “New” button
- New “Account” screen will open
- Select Account Category = Other Current Assets
- Detail Type = Other Current Assets
- Name= Trade-In Inventory Clearing
- Description = Trade-In Inventory Clearing
- Remember to leave the account “Balance” blank
- Save
- See screenshot photo for reference
Step # 2
You will need to open new product/service item for trade-in credit
To add new item in Products and Services:
From the home page screen
- Select the Company Gear (located at upper-corner)
- Select Products and Services under Lists header
- Select blue “New” button
- New “Product or Service” screen will open
- Name = Trade In Credit
- Sales Information
- Checkbox: I sell this product/service to my customers
- Price/Rate = Leave blank
- Income Account = Trade-In Inventory Clearing
- Save
- See screenshot photo for reference.
Step # 3
To Create Sales Receipt
From the home page screen
- Select Create “+” Plus sign (upper-middle)
- Select “Sales Receipt” screen
- Select Customer
- Select Payment Method
- Under Product/Service,
- 1st line > select new product item selling for $600 (in this example Apple iphone 5s)
- 2nd line > select newly created “Trade-In Credit” item (in this example Samsung Galaxy as negative $150)
- Subtotal before tax is $450.
- Tax = $48
- Total Amount Paid = $498
- See screenshot photo for reference.
This sales receipt will handle as usual revenue and COS aspect of regular inventory item sold and also setup $150 as non-inventory asset on the Balance Sheet.
Now next step is to move this trade-in item (with quantity on hand and value) from Trade-In Inventory Clearing to regular Inventory Asset Account.
Step # 4 & 5 (together)
To add-in Used item as inventory on hand, we will create zero Bill.
From the home page screen
- Select Create “+” Plus sign (upper-middle)
- Select “Bill” screen
- Create new vendor as “Trade In” (preferred name)
- Under Account Details:
Select Account = Trade In Inventory Clearing (this is setup as other current assets)
Amount = -$150 (negative amount) - Move to Item details:
Under Product/Service
Select “Add New” - New Product or Service Information will open.
This is to setup trade-in item as Inventory (in this example Samsung Galaxy, Qty 1, cost $150)
- Name = Samsung Galaxy Used
- Track Quantity on Hand (for inventory items)
- Checkbox: I track quantity on hand for this product. This enables inventory cost accounting.
- Initial Quantity On Hand – 0 (very important, do not enter qty 1)
- Inventory Asset Account = Inventory Asset
- Enter Sales and Purchase Information (preferably same as name)
- Price/Rate = Selling Price (for example $200)
- Cost = Actual Cost (in this example $150)
- Income Account = Sales of Product Income (selection of preferred income account)
- Expense Account = Cost of Good Sold (default account, no need to change it)
- Select Taxable box if this item is taxable
- SAVE
- See screenshot photo for reference.
Now back to “Bill” screen again.
- You should see
Qty = 1
Rate = 150
Amount = 150 - Balance Due as well as Total should show as $0.00.
- Save and Close
- Done.
- See screenshot photo for reference.
Now, if you back to see your inventory on hand report, you should see quantity as 1 for Samsung Galaxy Used item which is correct. Also, go back to Trade-In Inventory Clearing account, balance should be zero which is correct as well.