An oral promise (by an individual or entity) to pay is the value parted with in consideration for the hire of services of another

An oral promise (by an individual or entity) to pay is the value parted with in consideration for the hire of services of another

Illustrative example:

On June 25, 20x2, AAA Trucking Services Company received Bill No. 2222, in the amount of P15,000.00 from BS Accounting Firm, for the tax services rendered which it promised to pay at the end of month.

Analysis and Explanation:

Note: when analyzing a business transaction, the bookkeeper or analyst must look at the side or perspective of the company.   

Analysis:

• The value received by the company: hire of services (tax services)

• The value parted with by the company: oral promise to pay 

Explanation:

The value received by AAA Company is the tax services from BS Accounting Firm.  In exchange, AAA Co parted with its oral promise to pay BS.

Therefore, in this transaction, the value received is the hire of (tax) services of another (BS) and the value parted with is the oral promise to pay by AAA to BS.


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