A number of independent economic events are presented below and overleaf. Comment on each case. In your discussion, identify if any concepts and/or principles underlying the recording of accounting transactions have been incorrectly applied.

(a) The owner of the business included his personal vehicle expenses in the entity’s statement of profit or loss.

(b) A major lawsuit has been filed against a children’s toy manufacturer as a number of children were injured due to the manufacturer’s products not complying with safety standards. The solicitors acting for the company believe there is a high probability of the company having to pay out a large amount in damages; however, nothing is reported in the financial statements as the amount is unknown.

(c) Land and buildings were reported in the statement of financial position at their estimated selling price. This amount was substantially higher than the outdated cost figures.