Question 3 - 750 words (4 marks)

Historical cost accounting continues to be used to prepare financial accounts within annual reports and can be classified as a normative theory. Identify three criteria that can be used to evaluate a theory and apply these to historical cost accounting. Briefly explain why you think historical cost accounting continues to be used as a measurement basis within finanical reporting.

In addition to the marks above, 2 marks are allocated for academic writing, and 1 mark is allocated for referencing.

RATIONALE

This assessment task will assess the following learning outcome/s:

be able to critically evaluate attempts to develop and apply a conceptual framework.

be able to critically appraise the objectives of accounting and relate them to the various concepts of accounting discussed in earlier subjects.

be able to analyse the possible usefulness of alternative measurement systems to historical cost.