George Gleed, 66, said he was showing John Smith, also aged 66, how the 1843 pistol worked at his home in Chalford Hill, near Stroud, Gloucestershire, on 1 April. Both had a longstanding interest in guns.
Mr Gleed said he believed the bullets in the gun were deactivated. Mr Smith had pulled the trigger a number of times before handing it back, he said.
Mr Gleed then began clicking the gun over himself as Mr Smith sat in a nearby chair, the inquest in Cirencester was told. "There was an explosion. He said `bloody hell' and put his hand on his chest," said Mr Gleed. "I said, `come on' as I thought he was fooling around because it was 1 April."
Mr Gleed, who lives in Rack Hill, Gloucestershire, said he had bought the Lefaucheux pin-fire pistol from a dealer, David Partridge, earlier this year. He later returned to Mr Partridge, who sold him the inert bullets. When he returned home he fired the gun up to 20 times at the ground to make sure the bullets were inert, Mr Gleed said.
Recording a verdict of accidental death, the coroner, Dr Sophie Burrows, said: "I am certain in his own mind Mr Gleed felt the weapon was safe and the bullet was inert."