The following are the main limitations of accounting :-
1) RECORDS : Accounting records only monetary transactions.
2) NO EFFECT OF PRICE-LEVEL CHANGE :-Accounting transactions are recorded at cost in the books. The effect of price-Level changes is not brought into the books with the that comparison of the various years becomes difficult.
3) LACK OF INFORMATION :- Accounting information may not be totally reliable as accounting statements are prepared by following basic concepts and conventions are used worldwide . For example , going concern concept gives us an idea that the business will continue and the assets are to be actually realizable . Similarly , by following the principle of conservatism the financial statements will not reflect the position of the business.
4)PERSONAL BIAS :-Accounting statements are influenced by the personal judgement of the accountant . If such judgement is based on integrity and competency of the accountant , will definitely affect the preparation of accounting statement.
5) ASSETS ARE RECORDED AT COST :-According to cost concept, assets mainly fixed tangible assets are recorded at cost at which they are acquired. change in Market value of the Assets is not considered.
1) RECORDS : Accounting records only monetary transactions.
2) NO EFFECT OF PRICE-LEVEL CHANGE :-Accounting transactions are recorded at cost in the books. The effect of price-Level changes is not brought into the books with the that comparison of the various years becomes difficult.
3) LACK OF INFORMATION :- Accounting information may not be totally reliable as accounting statements are prepared by following basic concepts and conventions are used worldwide . For example , going concern concept gives us an idea that the business will continue and the assets are to be actually realizable . Similarly , by following the principle of conservatism the financial statements will not reflect the position of the business.
4)PERSONAL BIAS :-Accounting statements are influenced by the personal judgement of the accountant . If such judgement is based on integrity and competency of the accountant , will definitely affect the preparation of accounting statement.
5) ASSETS ARE RECORDED AT COST :-According to cost concept, assets mainly fixed tangible assets are recorded at cost at which they are acquired. change in Market value of the Assets is not considered.
The points which are mentioning within your post are really amazing and useful to know the fact about the accounting.
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Despite accounting’s huge advantages, there are limitations of accounting that every accountant, businessmen, student must be aware about.
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