An oral promise (from an individual or entity) to pay is the value received in exchange for the hire (or use) of the property

An oral promise (from an individual or entity) to pay is the value received in exchange for the hire (or use) of the property

Illustrative example:

On June, 8, 20x2, AAA Trucking Services Company sent a bill, P15,000.00, to KES Engineering Services for the hire of delivery truck which they promised to pay on 20th of the 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: oral promise to pay from an entity

• The value parted with by the company: hire of the company property  

Explanation:

The value received by AAA Company is the oral promise to pay from KES in exchange for the hire or use of delivery truck.

Therefore, in this transaction, the value received is the oral promise to pay from an entity and the value parted with is the hire of the company property.


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