Question

Explain the advantages and limitations of accounting.

Answer 1

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✔Accounting helps to maintain the business records in a systematic manner. It helps in the preparation of financial statements. Accounting information is also used to compare the result of current year with the previous year to analyze the changes. It helps the managers in the decision making process.

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One of the biggest limitations of accounting is that it cannot measure things/events that do not have a monetary value. If a certain factor, no matter how important, cannot be expressed in money it finds no place in accounting.

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Answer 2

Advantages of accounting :-

♥ The financial position and performance during and at the end of the accounting period is known .

♥ Helps the management to make business plans , takes decision and exercise control over the affairs .

♥ A systematic and timely recording of transactions obviates the necessity to remember transactions .

♥ Loan is granted by banks and financial institutions on the basis of growth of the business .

♥ It is often accepted as good evidence

in the court .

Disadvantages of accounting :-

♥ Even though most transactions are recorded on the basis of evidence , according isn't fully exact .

♥ Since they are prepared following the accounting concepts , according information may not be realistic .

♥ It ignores qualitative elements like quality or skills of management and staffs .

♥ Money doesn't remain stable , unless price level changes are considered accounting information will not show correct financial results .