• Describe the limitation if any of the statement of financial position for the purpose of analysis by management and investor..
ANSWER:
• Limitations of Financial Accounting – Provides Only Historical Data, Static in Nature, Fails to Control Cost, Fails to Analyse Losses and a Few Others. ... Financial Accounting cannot serve this purpose at all. The indications given by Profit and Loss Account and Balance Sheet are generally inadequate.
• The following points highlight the five major limitations of financial statements, i.e, (1) Only Interim Reports, (2) Do not Give Exact Position, (3) Historical Costs, (4) Impact of Non-Monetary Factors Ignored, and (5) No precision.
• Interim and Final Picture- The financial analysis presents only the interim report and thereby provides incomplete information. They fail to provide the final and holistic picture. Ignores Qualitative and Non-monetary Aspects- The financial analysis reveals only the monetary aspects.
Answers & Comments
QUESTION:
• Describe the limitation if any of the statement of financial position for the purpose of analysis by management and investor..
ANSWER:
• Limitations of Financial Accounting – Provides Only Historical Data, Static in Nature, Fails to Control Cost, Fails to Analyse Losses and a Few Others. ... Financial Accounting cannot serve this purpose at all. The indications given by Profit and Loss Account and Balance Sheet are generally inadequate.
• The following points highlight the five major limitations of financial statements, i.e, (1) Only Interim Reports, (2) Do not Give Exact Position, (3) Historical Costs, (4) Impact of Non-Monetary Factors Ignored, and (5) No precision.
• Interim and Final Picture- The financial analysis presents only the interim report and thereby provides incomplete information. They fail to provide the final and holistic picture. Ignores Qualitative and Non-monetary Aspects- The financial analysis reveals only the monetary aspects.
EXPLANATION:
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