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Limitations of Accounting

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  • Limitations of Accounting

    Accounting records relate to the past transactions, which provide fairly good account of the economic activity of the business enterprise. However, from decision-making viewpoint we need information, which relates not only to past but also about present and future. Financial accounting makes provision for financial information but it does not provide non-financial information such as behavioral and socio-economic. If the objective of accounting reports is to influence the behavior through decision-making then it must provide the data concerning the behavior and outcome of human activity to facilitate performance evaluation. Therefore, the accounting information does not fully meet different types of information-requirements of varied decision making situations. Accounting provides stewardship information and not decisional information.
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  • #2
    Just to add up information about this topic, some limitations of accounting are the following:

    1. Only transactions that is measured in monetary terms can be recorded in accounting.
    2. The information coming from accounting may not be that realistic. It is only prepared by conventions and basic concepts.
    3. Accounting statements are influenced by accountant's personal judgement, its because accountant can select any method of depreciation.
    4. Changing of prices is not considered because the value is bound to change from time to time.

    These are some of the considered limitations of accounting, hope this will provide good information.

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    • #3
      Each business should record their accounts. If you're newbie in accounting, there're many (even free) software products for small businesses which allow you to keep records without any problem.
      Last edited by Lindi; 01-11-2016, 07:00 AM.
      Best Regards,


      • #4
        Accounting is essential for any type of business. If accounts maintenance is not in a proper manner, it causes many problems. There are plenty of accounting software sources available in online, through this tools to manage business accounts properly. Some tools are Quickbooks, Wave, Apptivo, etc apart from tons and tons of sources available to fulfill the customer needs.