WHAT ARE THE LIMITATIONS OF ACCOUNTING INFORMATION?


LIMITATION OF ACCOUNTING INFORMATION
•        Subjective nature inherent (e.g. Depreciation, stock valuation, R&D  etc.) Assumptions (alternative policies)
•        In ability to record non-monetary activities (e.g. Quality of staff, customer, public image etc.)
•        Instability of unit of measurement.
•         Non recording of fully depreciated assets and those acquired without payments. (eg. Goodwill or donation)
•        Financial statements are backward looking, i.e. uses past data (value of assets is what it can generate for the future)
•        Financial statements represent snap short information (Slight variation of time before or after will lead into different situation)
•        They are mult-purpose statements (it is unlike generic statement to meet different interests of varied users)
•        Subject to manipulation by management
•        Conflicting information (ratio analysis)

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