An oral promise (from an individual or entity) is received in consideration for the hire of services by the entity

An oral promise (from an individual or entity) is received in consideration for the hire of services by the entity

Illustrative example:

On June 18, 20x2, AAA Trucking Services Company presented Bill No. 8888, P280,000.00 to Angel Martin Cakes and Ice Cream Company, a customer, for the delivery and trucking services rendered by AAA which the customer promised to pay in 15 days. 

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: oral promise to pay

• The value parted with by the company: trucking services  

Explanation:

The value received by AAA Company is an oral promise to pay from Angel Martin.  In exchange, AAA Co. valued parted with is the trucking services rendered.

Therefore, in this transaction, the value received is an oral promise to pay from an individual and the value parted with is the hire of service (services offered).


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