discuss whether an entity include an asset in its balance sheet that it does not legally own and give reasons?

Answer 1

The only way that you could include an asset that you didn't own on the balance sheet, was if you borrowed money to buy it and therefore didn't have legal title to it yet. Then you would show the asset on your balance sheet, and the borrowing also on your balance sheet (but in the liabilities section).

Answer 2

Maybe. For example if you purchase a vehicle and finance it, you are not the legal owner, the bank is. However you would still include it on the balance sheet. The account payable balance on the note would offset the value of course, as would any depreciation allowable.