Question

accounting does not show the realisable value of business it is an (a) limitation of accounting (b) advantage of accounting(c) both A and B (d) none of this​

Answer 1

ANSWER ♥️

OPTION : A

LIMITATION OF ACCOUNTING

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Answer 2

accounting does not show the realisable value of business it is an (a) limitation of accounting (b) advantage of accounting

(c) both A and B (d) none of this

The correct answer is :

(a) limitation of accounting

Explanation :

Accounting does not reflect the realisable value of the business as accounting has a limit.

Accounting is limited to monetary transactions only. Non-verbal transactions are not recorded in accounting. The accounting statement does not show the effect of price level changes on the value of the asset as it is based on historical cost. Accounting does not indicate any realizable value. The process of accounting can be manipulated to conceal certain facts and make the financial statements appear according to their own, this is also a limitation of accounting.

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Know something more :

Unrealised profit on goods sold and included in stock is deducted from:

ii) Revenue Profit

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When a machinery is purchased for cash, the cash balance is reduced and to that extent, the amount of machinery as an asset is recorded. This is done to follow which of the following accounting principles:

1) Dual Aspect Principle

2) Materiality Principle

3) Timeliness Principle

4) Consistency Principle

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