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The simplicity of bartering is one of the main advantages of this system. Issues with international trade, foreign exchange, and unbalanced economic power are virtually nonexistent with a bartering system. However, some disadvantages also exist. For a bartering transaction to occur, both parties’ wants or needs must coincide to lead them to make a deal. Without a standard measure of value of goods and services, parties in the bartering transaction will need to spend time agreeing on the terms of the deal.

It’s common for both parties to place a higher value on their own goods or services and a lower value on the other party’s items. Trust is also a component of bartering, because the representation of the goods or services offered must be accurate. If something is misrepresented in a transaction, the other party will have little recourse when a problem ensues. When bartering, people may need to store their accumulated possessions to preserve their purchasing power. Depending on the types of items, this might be difficult and inconvenient.

• Money vs. Barter Systems – Allow your students to have a wider discussion about whether money or bartering systems are superior to one another.
• Bartering, Trading, and You – This is a complete educational resource for teaching about money.
• Impediments to Barter Trading – A recent, in-depth study delves into the perceptions of those who practice bartering.
• Bartering Overview – Today, these systems can be used by small businesses and people as a legal transaction, but negotiations may be lengthy.
• Monetary Transaction Tools – Find helpful terms, activities, and good resources for teaching your students here.
• Money Matters: Discussion Guide – There are many ways you can go about teaching these concepts, and this resource lists them helpfully.
• Why We Trade: Exchanging Goods and Services – Trade jelly beans or swap shirts and caps to explain the exchange of goods with your students.

Because bartering does not involve the exchange of money for goods and services, it might seem like an ideal way to avoid paying taxes on transactions. However, the U.S. Internal Revenue Service informs taxpayers that the fair market value of goods or services received via bartering is considered taxable income. Parties who engage in bartering transactions must report this value as income on tax returns. The IRS requires reporting of bartering for the year it occurs. Failure to report bartering activity could lead to tax penalties.

• Four Things You Should Know if You Barter – Today, bartering is done, but it has been made more complicated by taxation and financial institutions.
• Three Ways to Get the Equipment You Need Without Going Broke – Small businesses sometimes need to barter with other companies to succeed.
• Barter Tax and Accounting Issues – If someone does want to barter, be sure to have an accountant who can deal with these issues.
• Money Soup: A Legal Guide to Bartering, Giving, and Getting Stuff Without Dollars – Using the helpful metaphor of soup, this article discusses types of transactions and their nuanced differences.
• It Taxes a Village: The Problem With Routinely Taxing Barter Transactions – Should we actually tax barter transactions, which often requires the monetary appraisal of items?
• Should You Be Bartering? – An expert and economist discusses the main problems with doing this today.
• Four Facts About Bartering – Learn about these four facts if you would like to engage in bartering in today’s economy.