Major drawbacks or limitations of management accounting can be expressed as follows:
1. Lack Of Specific Procedure
Management accounting does not follow specific accounting rules, procedure and techniques. So, it fails to provide accurate information and data in the lack of proper principles.
2. Uncertainty
Management accounting is futuristic in nature, so it provides data and information for the purpose of future planning, decision making, forecasting, and decision making. Since future is uncertain, its plans and policies may not bring expected results.
3. Dependency
Management accounting is practiced on the basis of data and information received from cost and financial accounting. So, its accuracy and reliability depends on the effectiveness of cost accounting and financial accounting system.
4. Costly System
Management accounting is very expensive system to install and practice. Low budget business houses cannot afford to install it.
5. Interdisciplinary knowledge
Management accounting draws from a number of disciplines such as cost accounting, financial accounting, statistics, economics, science etc. So, a single employee (accountant) may not possess interdisciplinary knowledge to maintain management accounting system.
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6. Only A Tool
Management accounting is only a tool to provide data and information to the management. It is not the alternative of management and cannot make any decision.
7. Personal Bias
Management accounting may be affected by the personal interpretation and bias of the top manager. Decisions may be influenced by personal prejudices of an individual.
