Limitations Of Accounting

Accounting , Finance
The main drawbacks or limitations of accounting can be highlighted as follows:

1. Ignores Non-monetary Items

Accounting records only monetary items (that can be measured in terms of money) and ignores non-monetary items (cannot be measured in terms of money) such as employee morale, loyalty, management efficiency etc. that play important role in success or failure of business.

2. Past Data

Generally, accounting uses past or historical financial data and information. It ignores some key factors like price level change and inflation. So, it may fail to show actual financial strength or weakness of the firm.
disadvantages of accounting
3. Frauds And Manipulation

Several accounting treatments are based on personal judgment and estimates. So, there exists a chance of manipulation of data and commitment of frauds.

4. Several Alternatives

There are different methods of stock valuation, depreciation, capital budgeting decision, amortization of assets etc.. Several alternatives may create complexity and confusion.

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5. Lack Of Secrecy

It is very difficult to maintain secrecy of accounting data and information because of several users.

6. Difficulty In International Trade

Different accounting standards and methods may create difficulty in international trade.
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Benefits Of Job Design

Education , Management
The main advantages of benefits of job design can be highlighted as follows:

1. Assists Human Resource Planning

Job design helps HR planning process by providing essential information about the job to be performed such as nature of job, qualification, skill and knowledge to complete the job etc.

2. Employee Motivation

Under job design, duties and responsibilities of employees are allocated according to their skill, capacity and knowledge which helps to motivate the employees in the organization.

3. Low Labor Turnover

Well designed job reduce labor turnover, conflict and absenteeism because of motivation and job satisfaction.
advantages job design

4. Goal Achievement

Job design helps to motivate the employees by reducing absenteeism frustration and stress which helps to achieve organizational goal more efficiently and effectively.

5. Quality Of Life

Job design creates favorable working condition in the organization. It also establishes better labor relationship between management and employees. So, it ensures better quality of life.

6. Less Supervision Cost

It is another benefit of proper job design. Duties and responsibilities are scientifically allocated according to the competency of the employees. So, less supervision is required for competent employees which reduce supervision cost.

7. Increased Productivity

Because of employee motivation, proper allocation of job, good working condition and job satisfaction, productivity and profitability can be increased.

8. Good Labor Relation

Job design promotes good relation among employees and between management and employees.
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Advantages And Disadvantages Of Variable Costing

Accounting , Business
Benefits / Merits Or Advantages Of Variable Costing

The main advantages of variable costing can be highlighted as follows:

1. Simplicity

Variable costing system is simple and easy method of cost accumulation than absorption costing approach.

2. Assists CPV Analysis

It provides essential data and information for cost volume profit (CPV) analysis.

3. Cost Separation

It clearly separates manufacturing costs into fixed costs and variable costs which simplifies production activities.

4. Relation With Standard Costing And Budgetary Control

Cost controlling techniques such as budgetary control and standard costing are related with variable costing.

5. Easy Profit Determination

It is very easy to determine profit under variable costing. Profit is determined on the basis of sales and it is not affected by inventory changes.

6. Planning And Controlling

Variable costing helps the management in cost control and profit planning.

Drawbacks / Limitations Or Disadvantages Of Variable Costing

The main disadvantages of variable costing system can be highlighted as follows:

1. Ignores Accounting Principles

This method of cost accumulation ignores generally accepted accounting principles (GAAP).

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2. Difficult To Separate Costs

It is very difficult to separate manufacturing overhead into variable costs and fixed costs.

advantages disadvantages variable costing

3. Understate Of Cost

This method understates the product cost by excluding fixed costs. So, fair cost of production cannot be determined.

4. Unsuitable

Variable costing is useful for internal reporting only and not suitable for external reporting.

Pros And Cons Of Variable Costing In Short

Pros:
- It is useful for cost volume profit analysis because it provides data about fixed cost, contribution margin etc.
- It is very helpful for management to make pricing decisions
- Profit can be determined easily in this method
- It simplifies production activities
- It provides cost data and information which is helpful for management control

Cons:
- It does not follow generally accepted accounting principles (GAAP)
- It is not suitable for making long-term pricing policy
- It becomes to separate manufacturing costs into fixed and variable costs
- Accurate cost of production cannot be determined because it excludes fixed costs
- It is not useful for external users such as investors, shareholders, public etc. because it is prepared for internal use only.
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Disadvantages Of Cash Flow Statement

Accounting , Finance
The major limitations or disadvantages of cash flow statement can be described as follows:

1. Limited Scope

Cash flow statement has limited scope because it cannot reveal net income from operation. 

2. No Complete Information

Cash flow statement cannot show the complete and up-to-date financial position of the firm.

3. Chance Of Inaccuracy

It may provide wrong information if there is wrong data in the balance sheet.

4. Ignores Accounting Concept

Cash flow statement ignores accrual concept of accounting.

True net income cannot be obtained because cash flow statement ignores non-cash items.

6. Historical Data

It uses historical financial data from balance sheet and income statement. So, it may not be suitable for future forecasting and financial planning.
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Advantages Of Cash Flow Statement

Accounting , Finance
The main benefits or advantages of cash flow statement can be studied as follows:

1. Cash Inflow And Outflow

Cash flow statement reports about cash inflow and cash outflow and discloses the change in cash balances between two balance sheets.

2. Cash Forecast

Cash flow statement helps to identify future cash need by revealing current cash position. It helps the management to forecast future cash flow.
advantages cash flow statement
3. Liquidity And Profitability

It presents current cash position which helps to ascertain solvency, profitability and liquidity position of the business.

4. Financing Decision

Management can make different financing and investment decisions with the help of cash flow statement.

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5. Financial Planning

It helps the management to formulate financial plans.

6. Capital Budgeting Decisions

Capital budgeting decisions are taken on the basis of projected cash flows.

7. Prevents Mismanagement Of Cash

Cash flow statement prevents mismanagement of cash in the business firm.
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Disadvantages Of Funds Flow Statement

Accounting , Finance
Some of the notable limitations or disadvantages of funds flow statement can be highlighted as follows:

1. Historical

Funds flow statement is historical in nature because past financial information are used to prepare it. Financial statements and balance sheets of previous period are the bases of funds flow statement. So, it cannot present accurate current position of the business.

2. Not Original

It is only the rearrangement of financial data of balance sheet, financial statement and the income statement. So, funds flow statement is not original as it cannot be prepared alone.

3. No Cash Position

Funds flow statement does not disclose the cash position of the firm, for which cash flow statement should be prepared separately. 
disadvantages funds flow statement
4. No Future Indication

It discloses past financial situation of the firm which may not be suitable for future purpose.

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5. No Non-fund Transactions

It ignores non-fund transactions such as purchase of assets or properties by issuing shares. It records only those transactions which directly affect working capital.

6. Not Suitable

Funds flow statement is not suitable for financial analysis.
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