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
Calculate the NPV and ARR The manager of XYZ Ltd has identified a market for a new product that she estimates can be sold for $12 per unit. Research indicates that the busines

What would be the effect on the balance sheet if adjustments (a) and (f) were omitted at the end of the year?k question #Minimum 100 words accepted#

Q. Describe about Trade Test? With a view of perform the work in a trade an artisan staff should have the skill required for the trade and for this Railway workers classificati

A lawn care company started business on January 1, 2012. The company billed clients $105,000 for lawn care services completed in 2012. By December 31, the company had received $84,

Question 1 Explain the five accounting concepts with an example Separate entity concept Going concern concept Money measurement concept Cost concept Dual aspect

Legal Aspects There is no law relating to branch accounts but examination problems under this heading are frequently linked to either partnership or company account problems. Ans

a private owned business, pay salary to its employees according to the Ethiopian calendar month to the addis ababa city administration tax authority . Basic salary 3936 ,Normar wor

In 200 words or more, discuss the issues that relate to the accounting for operating and capital leases. In your posting, please articulate issues that the accountant faces in r

On July 1, 2010, Spear Co. issued 1,000 of its 10%, $1,000 bonds at 99 plus accrued interest. The bonds are dated April 1, 2010 and mature on April 1, 2020. Interest is payable sem

Jensen Company has the following situation: Sales Price: $40 per unit Variable Cost Per Unit: $25 per unit Fixed Costs: $20,000 Units Sold: 4,000 Jensen is considering lowering the