Limitations of Financial Accounting Essay

fiscal accounting is the only branch of accounting and it is non perfect. There atomic number 18 large numbers of limitations which open new musical mode to use separate tools of accounting. To know what are the main limitations of pecuniary accounting. It is in truth necessary for accountants. Accountants are often blind to these limitations. So, I am covering its limitation a lot of ground. Read below and understand-1. Financial accounting is of historic nature Net effect of transactions are recorded in pecuniary accounting which has happened in past. These accounts is just postmortem of all events of strain in past .These record does not helper for future think and another(prenominal) managerial decisions. Financial accounting shows the profitability of condescension however it is failure to tell that is it good or bad. Financial accounting is in addition failure to know the reasons of low profitability position.2. Financial accounting deals with boilers suit profi tability Accounts of business are made by a way which shows only overall profitability .It does not shows net profit per harvest , or per department or according to job . Thus it is very difficult to find all such activities which do not achieve profit. So, it creates inefficiency in business activities.3. Absence of full disclosure of facts In pecuniary accounting we record only those activities and transactions which we can show or describe in money. There are many other facts of business which are nonfinancial and nonmonetary like efficient management, demand of products of firm, good traffic in industry , good working environments which cannot be known by financial accounting .4. Financial account statements are interim report of business Financial statements made by financial accounting is the interim report of firms all business work but financial position and profitability which are shown in it is not fully sure . Due to adopting be concept, all transactions are recor ded on it real cost but by changing in the metre it is the need of time to adjust cost of assets and liabilities according to inflation of market. Because, financial accounting does not records according to inflation so its result does not show true position of business.5. Incomplete knowledge of costs From cost point of view, financial accounting is incomplete. In financial accounting, accountant does not calculate each and every products total cost. So, financial accounting does not help to determine the price of product of business.6. No provision of cost control Financial accounting does not help business organization for controlling the cost as there is no provision of controlling cost in it. In financial accounting, we issue cost, if we pay any expenses. Thus there is no provision of advancement in financial accounting. Except this, there is no any other way to inspect all expenses.7. Financial statements are affected from in the flesh(predicate) sound judgement Many even ts of financial statements are affected from personal judgment of accountant. Method, rate of provision of doubtful debts and valuation method are obstinate by accountant. Thus, financial statements do not show true and fresh view of business.