Reference no: EM13504727

Following are three requirements that affect certain assets:

1. the lower of cost and net realisable value rule;

2. accounting for depreciation by means of an accumulated depreciation account; and

3. accounting for doubtful debts by means of an allowance for doubtful debts account.

Required:

a) Which three accounting assumptions enable these three requirements to be used? Explain your answer.

b) Explain why we use these three requirements. (Hint: discuss how the relevant accounts, and the corresponding accounts, for each of the three requirements effect aspects of the Balance Sheet and Income Statement, in terms of overstatements or understatements.)

c) Explain what the collective impact is of these three requirements on the quality of the resulting accounting information provided to users.