What is 'Barter'

Barter is the act of trading goods and services between two or more parties without the use of money. Bartering benefits individuals, companies and countries that see a mutual benefit in exchanging goods and services rather than cash, and it enables those who are lacking hard currency to obtain goods and services.

BREAKING DOWN 'Barter'

An example of a barter arrangement would be if someone built a fence for a cattle farmer in exchange for food. Rather than the farmer paying the builder, say, $1,000 for the fence, he would give the builder a similar value in beef. Virtually any good or service can be bartered.

For individuals, bartering not only has an obvious financial benefit - it lets you keep more money in your pocket - it may also have a psychological benefit in that it can create a deeper personal relationship than a purchase and sale transaction.

When thinking about what you can barter to obtain a good or service you want, consider not only any possessions you might be willing to part with, but also any skills you have to offer. These skills might include what you do professionally, but they can also include any activity you're proficient at, from cleaning to babysitting to yard work to baking. You could even offer the use of your truck to someone who needs to move furniture in exchange for their help with, say, proofreading your new marketing newsletter.

One limitation of bartering is that you can only exchange goods and services with people you know. So if you don't know anyone who is offering what you want, you won't be able to get it through bartering. To overcome this limitation, bartering groups and bartering websites have been created to help barterers find more people to trade with.

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RELATED FAQS
  1. Are barter transactions taxable?

    Learn what a barter transaction is, how the IRS requires businesses to report barter exchanges and tax implications of barter ... Read Answer >>
  2. What are some examples of barter transactions?

    Learn how bartering involves the provision of goods or services in exchange for other goods or services, and review different ... Read Answer >>
  3. How and where is revenue recognized from barter transactions?

    Find out how the IRS requires companies that engage in barter transactions to recognize the revenue from such transactions ... Read Answer >>
  4. How can bartering result in a more optimal allocation of resources?

    Learn how bartering helps with resource allocation, managing trade deficits and exchanging goods. Review how individuals, ... Read Answer >>
  5. What are the differences for barter transactions recognition between IFRS and USGAAP?

    Understand the key differences between how the IFRS and the U.S. GAAP accounting systems recognize and record barter transactions ... Read Answer >>
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