Question

Question 1 (Adapted from Hui, W.F, and Ng, P.H. (2008). Accounting in Hong Kong. SCOPE. CityU.) Assets and liabilities are not simply "things owned" or "amounts owed". Rather, assets are rights to future economic benefits and liabilities are obligations to render future services. Consider this quotation as a background to the following questions: (a) A mini-bus company would generate most of its expected future benefits from employing skilled drivers and from using public roads. Therefore, its drivers and the public roads would make up most of the assets in the company balance sheet. Do you agree? (b) The mini-bus company faces the risk of having a major road accident in the future, which may result in obligations to pay damages costs to injured passengers. This is a significant liability to be recorded in the company balance sheet. Do you agree? Do (c) The accountant of the mini-bus company will record the fleet of mini-buses as an asset. you see any problems in measuring the "value" of the mini-buses in accordance with the concept of expected future economic benefits? Explain.

Problem1 (ethics in accounting)

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Answer 1

ausmees most of the anets sheat. there economic and alio the sheet. Assets are rights to future Economie benefits liabilities are obligations to render future gewices considering the above Quotations the following provided, No, I do not agree that from employing Skilled drivers and using public roads the minibus company would make up This is because even in the company's balance though ta future benefit but it is aucertain amount is not specific. Hence it should not be recorded the balance No, I do not agree because a liability depenting the outcome of a specific arise may enen. et in a possible obligation which may or may not anse defending, how a fiture event unfolds. A liability is recorded when it can be entimated elre it should be diclored. Hence in the the ginen enent and alo the estimation of liability cannot be meanned & Honce to recording the liability to pay damages to injured passengers is not . case there conrect.

benefit win still not be shown. but it can be estimated the value the comot C Yes, there is a problem in recording the theat of mini buses os termos anet for measu bee This is so because although of future economed benefits the feet of mini buses are major ant to the company hut amount of fiture econo were benefit is not known, and alo the value of those hunes be taken as the value of petune economic hevests and be recorded in the financial Statements. The principle & prudence a followed in & re it even in Eapen it needs to be recorded tout the as liability but pufit will not be as aut uwill it in certain. UP cannot accountancy permy of for losse lenke it then