Write any three limitations of accounting.
Write any three limitations of accounting.
Limitations of Accounting:
(i) No Consideration of Price Level Changes: The most serious limitation of accounting is an adoption of a historical cost concept for recording various assets irrespective of subsequent change in their prices.
(ii) Conservative Approach: Due to an application of the concept of conservation' all losses are provided for but no provision is made in the books for prospective profits. Hence the conservative approach is another limitation of accounting.
(i) 'Post-Mortem' Analysis of Past Records: Accounting provides information at the end of the accounting period in the form of annual accounts. Such information at the best is only of historical nature and cannot be used to take corrective action.
Limitations of Accounting:
(i) No Consideration of Price Level Changes: The most serious limitation of accounting is an adoption of a historical cost concept for recording various assets irrespective of subsequent change in their prices.
(ii) Conservative Approach: Due to an application of the concept of conservation' all losses are provided for but no provision is made in the books for prospective profits. Hence the conservative approach is another limitation of accounting.
(i) 'Post-Mortem' Analysis of Past Records: Accounting provides information at the end of the accounting period in the form of annual accounts. Such information at the best is only of historical nature and cannot be used to take corrective action.
