JE for An oral promise (from an individual or entity) to pay is received in consideration for a thing of value parted with

An oral promise (from an individual or entity) to pay is received in consideration for a thing of value parted with

Illustrative example:

On June 21, 20x2, AAA Trucking Services Company sold a used 3-in-1 printer, P1,500.00 to Emy Cruz which she promised to pay at the end of the month. 

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 3
When the value received is an oral promise to from a debtor, an asset is increased.
Therefore, debit the debtor's account / asset account title 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  - oral promise to pay
• What is the value parted with - a thing of value
• Assign the account title for the value received - Other Receivable 
• Assign the account title for the value parted with - Office Equipment
• 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 - P1,500.00
• Measure the amount equivalent of the value parted with -  P1,500.00  

Step 3

Record the journal entry

• Record the date of the transaction

Date of transaction:   June 21, 20x2

• Record the debit with the amount of the value received

Debit the value received :   Other Receivable  P1,500.00

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

 Credit the value parted with :  Office Equipment  P1,500.00  

• Write the explanation of the transaction or events.

Brief Explanation:  To record the sale of used 3-in-1 printer to Emy Cruz.

The finished journal entry of the above transaction