Write any three Limitations of Accounting.
Write any three Limitations of Accounting.
Limitations of Accounting
(1) No Record of Important Non-monetary Information: Accounting takes into consideration only monetary transactions. A transaction, however important, will not be recorded in the books if it cannot be expressed in the monetary terms.
(2) Window Dressing: Sometimes, information given by the accounting is not true and faithful or may be manipulated by the accountants. When accounts are manipulated and present the accounting information to show the better position of the business than the actual position, it is known as Window Dressing
(3) 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.
Limitations of Accounting
(1) No Record of Important Non-monetary Information: Accounting takes into consideration only monetary transactions. A transaction, however important, will not be recorded in the books if it cannot be expressed in the monetary terms.
(2) Window Dressing: Sometimes, information given by the accounting is not true and faithful or may be manipulated by the accountants. When accounts are manipulated and present the accounting information to show the better position of the business than the actual position, it is known as Window Dressing
(3) 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.
