Limitations of accounting
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Theoretical FrameworkQ.1 | Meaning and Scope of AccountingQuestion 4603 of 110
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Detailed Solution & Explanation
Limitations of accounting are:
Accounting is not an exact science.
It is based on many assumptions & conventions.
It involves many estimation which results into subjectiveness.
There are different alternatives possible for the same item which gives scope for
manipulation to get desired result.
It is a post mortem exercise and the information about entities perfor- mance and
financial position are available quite late i.e. after a year.
It cannot record the effect of many important events which cannot be measured in
terms of money like value of human resources which an enterprise has.
It does not consider the effect of inflation on income, expense, assets & liabilities
(known as Inflation Accounting).
About This Chapter: Theoretical Framework
Paper
Paper 1: Accounting
Weightage
5-10%
Key Topics
Policies, Standards (Ind AS), Vocabulary
This chapter covers Policies, Standards (Ind AS), Vocabulary and is part of Paper 1: Accounting in the CA Foundation exam.
View Official ICAI SyllabusExam Strategy Tip
This topic carries 5-10% weightage. Focus on understanding core concepts rather than memorizing.
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