Cancellation of oral promise to pay is the value received in consideration for the money parted with

Cancellation of oral promise to pay is the value received in consideration for the money parted with

Illustrative example:

On June 29, 20x2, AAA Trucking Services Company paid cash, P15,000.00 to BS Accounting Firm in full payment of AAA account with BS.

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: cancellation of oral promise to pay

• The value parted with by the company: money

Explanation:

The value received by AAA Company is the cancellation of oral promise to pay BS.  In exchange, AAA Co. parted with is money.

Therefore, in this transaction, the value received is the cancellation of oral promise to pay and the value parted with is the money.


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