Advantages and limtations of accounting

𝐖𝐡𝐚𝐭 𝐈𝐬 𝐀𝐜𝐜𝐨𝐮𝐧𝐭𝐢𝐧𝐠? 𝐀𝐝𝐯𝐚𝐧𝐭𝐚𝐠𝐞𝐬 𝐚𝐧𝐝 𝐥𝐢𝐦𝐢𝐭𝐚𝐭𝐢𝐨𝐧𝐬 𝐨𝐟 𝐚𝐜𝐜𝐨𝐮𝐧𝐭𝐢𝐧𝐠.

𝐀𝐜𝐜𝐨𝐮𝐧𝐭𝐢𝐧𝐠

Accounting is a process of identifying financial transactions, measuring them in money terms, recording books of accounts, classifying them into ledger accounts, summarising, interpreting and communicating the results to users.

𝐀𝐝𝐯𝐚𝐧𝐭𝐚𝐠𝐞𝐬 𝐨𝐟 𝐚𝐜𝐜𝐨𝐮𝐧𝐭𝐢𝐧𝐠

•  Users know about the financial position of their own businesses. They are known about their own business profit and loss account through accounting.

•  It helps make decisions, plans and other affairs for business.

•  It is a systematic and timely record of the transaction.

•  It provides the necessary information.

•  Accounting is helpful  in all tax settlements like income taxes, VAT taxes, sale taxes, etc

𝐋𝐢𝐦𝐢𝐭𝐚𝐭𝐢𝐨𝐧𝐬 𝐨𝐟 𝐚𝐜𝐜𝐨𝐮𝐧𝐭𝐢𝐧𝐠

•  Accounting is not fully exact.

• Accounting does not indicate the realizable value.

• Accounting doesn't record non-financial events.

• The non-monetary matter is ignored in accounting.

• Accounting ignores the effect of price level changes.