Record-keeping in community bartering schemes Community bartering schemes maintain books of account even though money is not used as a medium of exchange. People join such schemes out of conviction (they believe such schemes foster a sense of community) or out of necessity (they are unemployed and short of money). The Financial Times describes how one such scheme called ‘Lets’ (Local Exchange and Trading System) operates in the UK.

To start up a Lets a group of people produce a directory of services offered. Each item is priced according to the local unit. In some schemes the unit is linked to an hourly standard. The beak (an example of a local unit) is worth 10 minutes of labour.

Members of the schemes are given cheque books and a central record keeper debits or credits their accounts after each transaction.

(Rich, M. (1994), ‘How to barter a massage for didgeridoo expertise’, Financial Times, 27 August 1994)

Members of a Lets are encouraged to run up debts (‘go into debit’ is the phrase used). A co-ordinator of a local scheme remarks to the Financial Times:

It is the people with large credits and no debits who let the system down. If people do a lot of work for other people but cannot think of anything they want, it creates a lot of people with large negative balances who then become disinclined to trade.

(Ibid.)

Required

(a) Assume that a community bartering scheme has two members, A and B. B performs services for A. Show in outline how the scheme’s bookkeeper records this transaction – in the general ledger and in the subsidiary ledger (i.e. the individual members’ accounts). Confirm that, by running up a debt, A has a debit balance.

(b) Comment on the coordinator’s observation that the people who let the system down are those with large credits and no debits. How can a community bartering scheme overcome this problem?

AppenedixLO1