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Customer trade-ins

Some businesses accept customer trade-ins to reduce the selling price of goods sold. For example, a car dealer might accept a vehicle trade-in and deduct the trade-in value from the price of a new car.

The steps below can be used for most trade-in situations, but you should also check with your accounting advisor about your tax/GST reporting obligations associated with trade-ins for your business.

1. Set up for trade-ins


Before recording a trade-in, there's a couple of things you need to do.

  1. Create an asset account with the Account Type set to Bank. This account will be used as a clearing account to hold the value of the trade-in.

    Asset account setup

  2. Create an inventory item to represent a default trade-in item. You'll use this item when recording sales which include a trade-in to deduct the trade-in value from the sale price.

    • Select the option I Sell This Item

    • For the Income Account for Tracking Sales, select the asset account created above (ignore the warning about this account usually being an income account)

    • On the Selling Details tab, select the relevant Tax/GST Code When Sold.

      Trade-In Item

You're now ready to record sales which include trade-ins.

2. Record a sale that includes a trade-in


If the trade-in is from a new customer, create a customer card for them.

You can then enter an invoice to record the sale.

  • On the first line, enter details of the item being sold.

  • On the second line:

    • enter a negative one (-1) in the Ship field

    • select the Trade-In item created earlier

    • enter the trade-in value in the Price field

      Sale with trade-in

Recording this sale will:

  • deduct the value of the trade-in from the amount the customer needs to pay, and

  • deposit the value of the trade-in into the Trade-in Clearing account.

3. Record a bill for the trade-in item


When you receive a trade-in, you're effectively buying that item from the customer. Here's how you can record that purchase:

  1. Create a supplier card for the customer. This will allow you to select this supplier when recording the purchase.

  2. Create an inventory item for the trade-in item.

    • Select the option I Buy This Item. Depending on what you do with your traded-in items, you can also select I Sell This Item and I Inventory This Item.

    • Select the applicable Expense Account for Tracking Costs.

    • On the Buying Details tab, select the relevant Tax/GST Code When Bought.

      Item for traded-in item

  3. Enter a bill for the trade-in item.

    • In the Supplier field, select the supplier card you created for the customer.

    • Select the trade-in item in the Item Number field.

    • Enter the trade-in value in the Price field.

      Purchase of traded-in item

Recording this purchase will account for the receipt of the trade-in item.

4. Close the bill for the trade-in item


You can now close the bill using the funds which were allocated to the Trade-in Clearing account when you recorded the sale.

On the Pay Bills window:

  • Select the Pay From Account option and select the Trade-in Clearing account.

  • In the Supplier field, choose the supplier card you created for the customer. Their open bill will be listed.

  • In the Amount field, enter the trade-in value.

  • Apply this amount against the bill.

    Paying bill for traded-in item

Recording this payment will:

  • close the bill, and

  • clear the balance of the Trade-in Clearing account.