The following are the advantages of accounting.
A. It helps in ascertaining profit/loss for the financial year.
B. It facilitates to ascertain financial position of the business.
C. It facilities to replace human memory by maintaining complete record of financial transactions.
D. It facilities to comply with legal requirements which require an enterprise maintain books of accounts.
E. It facilities the users to take decisions.
F. It helps the management in planing and controlling business activities and in taking decisions.
G. It helps in determining cost of product/service.
H. It helps in comparing performance of business in relation to other firms in the industry and also its own performance in the past.
I. It helps in determine income tax liability, sales tax,commercial tax etc.
J. It facilities to exercise better control over assets/resources management.
K. Facilitates in raising loans and Aldo in ascertainment of value of business.
The major limitations of accounting are as follows.
A. It ignores qualitative elements, like quality of its manpower, managerial skills of its administrators, public relations etc.
B. The financial statement are prepared on historical cost basis. It ignores the price level changes I.e. time value and purchasing power of money.
C. It is also not free from personal bias when exercising the choice out of alternatives available e.g. choice of method depreciation, choice in the method of valuation of inventory e.g. LIFO Or FIFO or average price methods etc.
A. It helps in ascertaining profit/loss for the financial year.
B. It facilitates to ascertain financial position of the business.
C. It facilities to replace human memory by maintaining complete record of financial transactions.
D. It facilities to comply with legal requirements which require an enterprise maintain books of accounts.
E. It facilities the users to take decisions.
F. It helps the management in planing and controlling business activities and in taking decisions.
G. It helps in determining cost of product/service.
H. It helps in comparing performance of business in relation to other firms in the industry and also its own performance in the past.
I. It helps in determine income tax liability, sales tax,commercial tax etc.
J. It facilities to exercise better control over assets/resources management.
K. Facilitates in raising loans and Aldo in ascertainment of value of business.
The major limitations of accounting are as follows.
A. It ignores qualitative elements, like quality of its manpower, managerial skills of its administrators, public relations etc.
B. The financial statement are prepared on historical cost basis. It ignores the price level changes I.e. time value and purchasing power of money.
C. It is also not free from personal bias when exercising the choice out of alternatives available e.g. choice of method depreciation, choice in the method of valuation of inventory e.g. LIFO Or FIFO or average price methods etc.
No comments:
Post a Comment