JE for A form of property is parted with in exchange for money received

A form of property is parted with in exchange for money received

Illustrative example:

On June 4, 20x2, AAA Company received cash, P250,000.00, for the sale of its old delivery truck used in the business.

How to record the above transaction

Step 1

Remember the guiding principle. 

DEBIT the Value Received

CREDIT the Value Parted With 

Applicable debit and credit rules 

Rule 1
When the value received is a thing of value, an asset is increased.
Therefore, debit the asset account title of that thing of value with the amount of increase.

Rule 2
When the value parted with is a thing of value, an asset is decreased.
Therefore, credit the asset account title of that thing of value with the amount of decrease.

Step 2

Analyze the business transaction or economic event

• What is the value received  - Money
• What is the value parted with - Form of property - Old Delivery Truck
• Assign the account title for the value received - Cash
• Assign the account title for the value parted with - Delivery Truck
• What is the effect of the value received in the accounting equation - Increase in Asset 
• What is the effect of the value parted with in the accounting equation - Decrease in Asset
• Measure the amount equivalent of the value received - P250,000.00
• Measure the amount equivalent of the value parted with - P250,000.00

Step 3

Record the journal entry

• Record the date of the transaction

Date of transaction:   June 3, 20x2

• Record the debit with the amount of the value received

Debit the value received :  Cash  P250,000.00

• Record the credit with the amount of the value parted with

 Credit the value parted with :  Delivery Truck  P250,000.00

• Write the explanation of the transaction or events.

Brief Explanation:  To record the sale of old delivery truck.

The finished journal entry of the above transaction.