JE for Use of property, or hire of services, of another person is received in exchange for money parted with

Use of property, or hire of services, of another person is received in exchange for money parted with

Illustrative example for use of property of another person or entity:

On June 30, 20x2, AAA Trucking Services Company paid cash, P10,000.00, to B & M Property Group Company, in payment for the month on the rental of shop space occupied by AAA Co. 

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 10
When the value received is the use, or hire, of others property or services, the capital / proprietorship account is decreased.
Therefore, debit the expense account title with the amount of decrease.
Note that income and expenses are implicit components of an equity account. That the net income or loss forms part of equity and to get the net income or loss, deduct expenses from revenue or income.  

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  - use of property (shop space)
• What is the value parted with - money
• Assign the account title for the value received - Rent Expense 
• Assign the account title for the value parted with - Cash 
• What is the effect of the value received in the accounting equation - Decrease in Capital
• What is the effect of the value parted with in the accounting equation - Decrease in Asset
• Measure the amount equivalent of the value received - P10,000.00
• Measure the amount equivalent of the value parted with -  P10,000.00

Step 3

Record the journal entry

• Record the date of the transaction

Date of transaction:   June 30, 20x2

• Record the debit with the amount of the value received

Debit the value received :  Rent Expense P10,000.00

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

 Credit the value parted with :  Cash  P10,000.00 

• Write the explanation of the transaction or events.

Brief Explanation: To record payment of shop space rental for the month of June 20x2.

The finished journal entry of the above transaction

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Illustrative example for hire of services of another person or entity:

On June 24, 20x2, AAA Trucking Services Company paid cash P7,000.00, to Rep-Car Auto Repair Shop for the minor repair of its delivery truck. 

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 10
When the value received is the use, or hire, of others property or services, the capital / proprietorship account is decreased.
Therefore, debit the expense account title with the amount of decrease.
Note that income and expenses are implicit components of an equity account. That the net income or loss forms part of equity and to get the net income or loss, deduct expenses from revenue or income.  

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  - Use or hire of services
• What is the value parted with - Money
• Assign the account title for the value received - Repairs and Maintenance Expense
• Assign the account title for the value parted with - Cash
• What is the effect of the value received in the accounting equation - Decrease in Capital
• What is the effect of the value parted with in the accounting equation - Decrease in Asset
• Measure the amount equivalent of the value received - P7,000.00
• Measure the amount equivalent of the value parted with -  P7,000.00  

Step 3

Record the journal entry

• Record the date of the transaction

Date of transaction:   June 24, 20x2

• Record the debit with the amount of the value received

Debit the value received :
Repairs and Maintenance Expense   P7,000.00

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

 Credit the value parted with :  Cash  P7,000.00

• Write the explanation of the transaction or events.

Brief Explanation:
To record payment for repairs of a delivery truck.

The finished journal entry of the above transaction