Limitations of financial accounting, Financial Accounting

LIMITATIONS OF FINANCIAL ACCOUNTING

1. Simply transactions which can be calculated in terms of money can be recorded in the books of accounts. Actions, though important they may be to the business, do not locate a place in the accounts if they cannot be calculated in terms of money.

2. According to the cost idea, assets are recorded at the cost at which they are acquired and so ignore the changes in values of assets brought about by changing value of money and market factors.

3. There is disagreement between one accounting principle and another. For instance, current resources are valued on the foundation of cost or market price either is less according to the principle of conservatism. So, in one year cost basis may be taken, while in another year market price may be taken. This standard contravenes the principle of consistency4. The balance sheet is basically the result of the personal judgment of the accountant with regard to the acceptance of accounting policies and as such objectivity factor is lost.

5. Financial accounting can be understood just by persons who have accounting knowledge.

6. Inter firm comparison and relative study of two periods are not promising under this system, as necessary past information cannot be made obtainable.

7. Financial accounting does not point to the cost behavior, so cost control cannot be adopted.

Posted Date: 10/15/2012 5:13:21 AM | Location : United States







Related Discussions:- Limitations of financial accounting, Assignment Help, Ask Question on Limitations of financial accounting, Get Answer, Expert's Help, Limitations of financial accounting Discussions

Write discussion on Limitations of financial accounting
Your posts are moderated
Related Questions
ABC Corportation purchased $15,000 of office furniture by putting down $7000 soqn in cash and the rest on accout

Calculate breakeven in sales units and in sales value: Tycoon makes and sells 600 toy cars per month.  Each toy car is sold for RM40 each.  Tycoon is currently producing at 50

How do you show bond amortization on a spreadsheet and then in journal entries and compute interest payments?

From the information provided, determine: 1.) The amount of retained earnings at December 31 and 2.) The amount of revenues for the period. Additional data: 1.)Expenses

Appointment of Liquidator The liquidator is appointed by the court after the above meetings have been held: if the meetings do not agree, the court must settle the issue: if no a

Sleek Ride, a company providing limo services, has a December 31 year-end date. For Sleek Ride, the following transactions occurred during the ?rst 10 days of June: a. Purchased, o

Personal representatives duties Personal representation has the following duties; 1) To provide and pay out of the estate of the deceased, the expenses of a reasonable funeral

Petition by creditor Any creditor including an assignee of a debt, may petition, provided: The debt due to him amounts to at least Shs 1,000; The debt is certain and i

1.      Allocation of Indirect Cost Radiology Department in long Island Jewish Hospital incurred $1,267,000 of total indirect cost in five procedures (CC#557: Diagnostic Rad