Advantages & Limitations of Accounting

Advantages of Accounting:

  • Accounting helps to maintain the business records in a systematic manner.
  • It helps in the preparation of financial statements.
  • Accounting information is also used to compare the result of current year with the previous year to analyze the changes.
  • It helps the managers in the decision making process.
  • It provides information to other interested parties such as shareholders, creditors, investors, customers, government, employees, regulatory bodies etc.
  • It helps in taxation matter
  • Accounting information can be produced as evidence in the legal matter.
  • It helps in valuation of business.

Limitations of Accounting

  • The items expressed in monetary terms are recorded in the accountings where as the items which are nonmonetary nature not recorded.
  • Sometimes accounting data are recorded on the basis of estimates and which could be inaccurate.
  • Fixed assets are recorded as the original cost.
  • Value of money does not remain stable so accounting value does not show true financial results.
  • Accounting can be manipulated and biased.