What are limitations of accounting?

What are the limitations of management accounting information?

• Answer:

  The Mgt Accounting suffers from certain limitations as follow: Based on Accounting Information: Mgt Acccounting is based on data of Financial and Cost Accounting. Historical data is used to make future decisions. The correctness and effectiveness of managerial decisions will depend upon the quality of data on which these decisions are based. If financial data is not reliable then Mgt Accounting will not provide correct analysis. Lack of Knowledge: the application of Mgt Accounting will be useful to person connected with Decision making process as they have proper understanding of Mgt Accounting and related subjects such as Statistics, Economics, Prinples of Mgt, Engineering etc., Intuitive decision: In Mgt Accouting decision making based on facts and figures, there is a tendency to make decisions intuitively. Mgt may avoid lengthy courses of deciding things and may take an easy course of arriving at decision, using intuitive. Interitive decisions limits the usefulness of Mgt Accounting. Not an alternative to Administration: The tools and techniques of Mgt Accounting provide only information and not decision. Decisions and their implementations are done, by Mgt. So it has supplementary service function and has no final say in taking decisions and their implementations. Top heavy structure: Introduction of this system is costly affair and can be used by big concerns only. Smaller concerns cant afford to use this system because of heavy cost. Evolutionary state: Mgt Accounting is only in a developmental stage. The technique and tools used by this system give differing results. The conclusions taken from analysis and interpretation are not the same. It will take some time to take a final shape. Personal Bias: The interpretation of financial information depends upon the personal judgment of the interpreter. Personal prejudices and bias affect the objectively of decisions. Psychological Resistance: The Installation of Mgt Accounting involves basic changeless in organizational setup. New rule and regulations are to be framed which affect a number of personnel and hence there is a possibility of resistance from some or other.