Ex-Gratia Compensation for Hotel Guests

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  • Avatar of angryhamtaro
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    Hi OpenTuition buddies! I need help with this question on specialized entity:

    You are the accountant of a hotel which has recently encountered staffing problems, resulting in a sub-standard service being provided to guests. The hotel received numerous complaints and management responded by offering partial refunds or free drinks at the hotel bar to guests. These were offered as a goodwill gesture.

    As at year end of 30 June 2010, an amount of $30,000 was refunded back to the guests and the cost of $10,000 free drinks was given out.

    Discuss how the 2 forms of ex-gratia compensation to hotel guests should be accounted for.

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