what is accounting?what are its objective and limitation
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the process or work of keeping financial accounts is known as accounting
ohjectives-
Permanent Record
Any business firm needs a permanent record of the transactions that it indulges in. These records could be required for internal purpose, for taxation purpose or for any other purpose
Efficient Use of Resources
Firms can also conduct useful internal analysis with the help of accounting data. Accounting records tell the firm what resources were committed to what activity and what time. These records also summarize the return that was obtained from these activities.
Projections
Accounting helps management and investors look forward. Costs and revenue growths can be projected after substantial data has been accumulated.
LIMITATIONS-
1. Transactions of non-monetary nature do not find place in accounting.
2. Cost concept is found in accounting. Price changes are not considered. Money value is bound to change often from time to time. This is a strong limitation of accounting.
3.Acceptable alternatives are so broad based that comparisons are likely to be confusing or misleading.
4.Accounting policies are framed by the Accountant. The figures of balance sheet are largely resulted by personal judgement of accountant hence it is the subjective factor that prevails in accounting and objective factor is ignored.
5.Recording and accounting for wages and labour is not carried out for different jobs, processes, products or departments.
6.It is difficult to know the behaviour of costs in financial accounting as expenses are not assigned to the product at each stage of production.
7.Financial accounting does not provide information to analyze the losses due to various factors —idle plant and equipment, seasonal fluctuations in volume of business etc.
8.Financial accounting does not set up a proper system of controlling materials and supplies.
ohjectives-
Permanent Record
Any business firm needs a permanent record of the transactions that it indulges in. These records could be required for internal purpose, for taxation purpose or for any other purpose
Efficient Use of Resources
Firms can also conduct useful internal analysis with the help of accounting data. Accounting records tell the firm what resources were committed to what activity and what time. These records also summarize the return that was obtained from these activities.
Projections
Accounting helps management and investors look forward. Costs and revenue growths can be projected after substantial data has been accumulated.
LIMITATIONS-
1. Transactions of non-monetary nature do not find place in accounting.
2. Cost concept is found in accounting. Price changes are not considered. Money value is bound to change often from time to time. This is a strong limitation of accounting.
3.Acceptable alternatives are so broad based that comparisons are likely to be confusing or misleading.
4.Accounting policies are framed by the Accountant. The figures of balance sheet are largely resulted by personal judgement of accountant hence it is the subjective factor that prevails in accounting and objective factor is ignored.
5.Recording and accounting for wages and labour is not carried out for different jobs, processes, products or departments.
6.It is difficult to know the behaviour of costs in financial accounting as expenses are not assigned to the product at each stage of production.
7.Financial accounting does not provide information to analyze the losses due to various factors —idle plant and equipment, seasonal fluctuations in volume of business etc.
8.Financial accounting does not set up a proper system of controlling materials and supplies.
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