Trade-in Example: Music Store Sale

Let's assume that you are selling a piano to a customer for £3,000 and will accept a trade-in of the customer's current piano for £750. The customer's balance due for the purchase will be £3,000 minus the £750 trade-in amount. You record the trade-in piano as a purchase, making it part of your stock.

The result is that the amount of the customer's invoice is reduced to £2,250. The £750 purchase of the customer's piano is fully paid, and the trade-in has been entered into your stock.

To process this trade-in, you will:

1. Create a customer card for the customer, and create a supplier card with the same name. (As an alternative, you could create a special supplier card for all of your trade-in purchases. You could give this card a special name like "Trade-In" to clearly identify its purpose.)



2. Create a new detail bank account just for trade-ins. Use the Edit Accounts window to designate this account as a new Detail Bank Account (Postable).



3. Create a new item that you can use with trade-in transactions to reduce the amount of the sale. Mark only the "I Sell This Item" box and choose the new detail bank account (created in step 2) as the "Income Account for Tracking Sales". (Ignore the warning that appears when you create this account. The account for tracking sales is usually an income account, but that does not apply to your trade-in bank account.)



4. Enter the sales information for the item being sold as you usually do. Then enter the special trade-in item that you set up. This will reduce the amount of the sale. (Be sure to enter the amount for the trade-in item as a negative number in the Total field.) Then record your sale.



5. Enter the purchase information for the actual trade-in item that will be entered into your stock. Enter the amount in the Total field as a positive amount. Then record your purchase.



6. Open the Pay Suppliers window and use the pull-down list in the upper left corner to choose the special bank account that you created in step 2.

Note that steps 2 and 3 need to be completed only once. You don't need to create a new detail bank account or item record for any subsequent trade-ins you accept.