Accounting provides information about the profitability and financial soundness of a concern. In addition,it provides other valuable information also. However,accounting has certain limitations. Explain any three such limitations.

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Solution

The drawbacks or the limitations of accounting are as follows:

(i) It is historical in nature. It does not reflect the current worth of a business.

(ii) The figures given in financial statements ignore the effects of changes in price level.

(iii) It is not free from the personal bias and personal judgment of the people dealing with it.

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