Only financial transactions are recorded in accountancy is this an advantage or limitation of accounting. Give reason.
Dear student,
Accounting is a systematic process of identifying,measuring,recording,classifying, summarising, interpreting and communicating financial information to the users.
Accounting is confined to monetary matters only and ignores the qualitative elements like quality or skills of management and staff, industrial relations, public relations etc. For instance, value of human resources,change in the managerial policies,dispute between sales and production personnel are few of the cases which affects the profitability of the business adversely.
For example, if workers stop working in the factory as a sign of protest,then the productivity decreases and as a result it impacts the profitability adversely but it is never recorded in Accounting as it cannot be measured in monetary terms.Though these are intricately related to financial transactions yet their impact can not be measured in terms of money precisely. Thus this is an inherent limitation of Accounting.
Regards
Accounting is a systematic process of identifying,measuring,recording,classifying, summarising, interpreting and communicating financial information to the users.
Accounting is confined to monetary matters only and ignores the qualitative elements like quality or skills of management and staff, industrial relations, public relations etc. For instance, value of human resources,change in the managerial policies,dispute between sales and production personnel are few of the cases which affects the profitability of the business adversely.
For example, if workers stop working in the factory as a sign of protest,then the productivity decreases and as a result it impacts the profitability adversely but it is never recorded in Accounting as it cannot be measured in monetary terms.Though these are intricately related to financial transactions yet their impact can not be measured in terms of money precisely. Thus this is an inherent limitation of Accounting.
Regards