Restaurant QuickBooks Guide, 2nd Edition (PDF Format)
Use QuickBooks to Account for your Restaurant's Bartered Services
By John Nessel, Restaurant Resource Group
Many restaurants like to barter food and beverage credits for products and services from their Vendors and others. These barter arrangements can be very cost effective, especially for products and/or services that are essential. Instead of paying $1 in cash, you pay the equivalent of your restaurants “cost of goods sold” for the food and beverage items you provide, say 30 to 35 cents.
From an accounting perspective these exchanges are rarely recorded properly, if they are recorded at all. The end result can misrepresent your food and beverage costs as well as your expenses, especially if you use barter on a regular basis. Here is a simple system that will allow you to take advantage of these trades, and will record these transactions in a way to keep your books “clean”.
Let’s use Creative Advertising as a Vendor who provides a $500 service to you in exchange for $500 of food and beverage credits. First off lets be clear what we are trying to accomplish. When we are done your books will reflect a $500 advertising expense that is offset by $500 of food and beverage sales. We also need to recognize that the Creative Advertising is unlikely to use all its credit in one visit, so a means of keeping track of the credit till it is fully used is also important. Let’s begin by setting up a system to track the credit.
Use Your POS to Keep Track of the Credit
Most current POS systems have the ability to track house charges by customer, and many can even keep track of pre-entered credit amounts. If you have this type of system (contact your POS salesperson if necessary) you can easily enter Creative Advertising as an authorized House Charge account and may even be able to enter a credit amount of $500 (if the POS cannot track the running total and credit balance than use a simple spreadsheet).
“Ring in” the Meal the Same As Your Paying Customers
When the customer (Creative Advertising in this case) orders his meal, treat it the same as any paying customer by entering the sale in your POS. When it is time to pay for the meal, let’s say the total for this visit is $75, the server simply uses a house charge key (rather than cash or credit card) and links the charge to the specific authorized account, which you previously set up to track Creative Advertising's account.
At the end of the day the POS report will show the $75 as a house charge. You may even have additional house charges that day that result in a total greater than $75. Either way you need to make sure that you can easily recognize this “line item” on the POS daily sales report so that you can make a consistent General Journal entry into your QuickBooks accounting system.
Record the Credit as Part of Your Daily Sales Entry
You will be recording this $75 expense as part of your daily sales entry into QuickBooks. All the information required to make this entry will come from your POS report. The daily sales entry therefore takes into account all the sales, meals tax, expense and deposits for the day. The example below is simplified to reflect only sales, meals tax collected, the house charge, cash and credit card receipts and cash over/short. A more typical entry might also include gift certificate sales and redemptions, discounts, complimentary meals, and paid outs.
Note: The Restaurant Operators Complete Guide to QuickBooks devotes an entire chapter to using General Journal entries to record your daily sales and deposits information into QuickBooks
From the QuickBooks Menu Bar select Company….Make Journal Entry. After entering the date corresponding to the days sales make your entry by crediting the sales totals and meal tax collected and then debit the house charge and deposits as indicated below (for ease of daily use you should create a memorized transaction template that has all the general ledger accounts already set up). Note that the $75 vendor charge (barter) is recorded in QuickBooks as General Ledger #1225 House Charge (Other Current Asset) in this simple example.
Note: The reason that you don’t simply code this amount to Advertising expense is that your POS summary report will not indicate who produced the charge(s), but simply the total for the day. This total may also be the result of more than one house charge
Convert The Barter House Charge to the Proper Expense Account
If you stop the process at this point you will have accurately recorded the sale, but not the corresponding advertising expense that created it. Moreover your Balance Sheet will indicate you have “Other Current Assets” (in the form of uncollected House Charges) that are certainly not accurate. You therefore want to periodically (at the end of each month) check your POS system reports, or spreadsheet that tracks Creative Advertising’s running credit total, and determine the total credits used by Creative Advertising to date (say $350). Then make another QuickBooks General Journal entry that reduces (credits) the GL #1225 House Charge account previously recorded in QuickBooks by $350 and offsets it with a $350 increase (debit) to the expense account corresponding to the Vendor’s bartered service (e.g. GL #8000 Advertising & Promotion). Record the Vendor by name in the “Name” column of the journal entry so that the expense will be associated with Creative Advertising in your records.