“Accounting is an art of recording, classifying, summarizing ,analysing, interpreteting and communicating the financial information to all the financial users of the company.
Preparation of financial statement that can present true and fair view of the financial affairs of the business.
Disadvantages/ limitations of accounting:
– Accounting is not fully exact:
As some estimate are made in accounting for example provision for bad and doubtful debts that is why it is not fully exact .
– It does not indicate the realisable value:
The balance sheet does not show the amount of cash with the firm is realised by the sale of all the assets, this is because many Assets and not meant to be sold, the are meant for use .
– Accounting ignores the qualitative elements:
Accounting is limited quantity only, qualitative elements like quality of staff, public relations are ignored.
– Accounting alwsays ignores the effect of price level changes:
Accounting statement are prepared at historical cost. Money does not remain stable(changes in value). Unless Price level changes are considered accounting information will not show true financial result.
– Accounting may lead to window dressing:
Window dressing means manipulation of account so as to hide relevant facts and present the financial statement in such a way, so as to show better position than what it actually is.
Services rendered by accountant to the society-
– Maintenance of books of accounts: Maintenance of books of account means recording all the transactions systematically on regular basis.
– Statutory audit: Examining accounts of the company and preparing reports and submitting to the company.
– Internal audit: Review of accounts and operation of business by employees.
– Taxation: Representing assessing before the tax authorities giving advice to the business asses the tax, preparing the return returns etc.
– Financial Services: See also guides regarding fair capitalisation(earning is sufficient to you in return)