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Class : 11
Unit : Account

Mention any five limitations of accounting.

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Ans : The following are the three limitations of accounting: a. Ignore non-monetary facts:-Accounting only records the transactions which have monetary value. It does not record those events of the business which do not have monetary value. b. Ignores time value of money:-Accounting does not consider time value of money. It shows all its assets and other items at their cost price and does not consider their current market price. c. Based on historical information:-Accounting records only the past transactions or already happened events. It does not record present as well as future transactions. d. No individual results:-Accounting shows the aggregate results (Profits or losses) and financial position of the firm. It does not provide product-wise, process-wise, department-wise or area-wise results of the business. e. No help in price fixation:-Accounting does not help in price fixation because it can not exhibit the total cost of the products.
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