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LIMITATIONS OF MANAGEMENT ACCOUNTING

LIMITATIONS OF MANAGEMENT ACCOUNTING



Despite the fact that management accounting is very useful for the business concern, still it has got certain limitations which are discussed below:

It is based on Financial Accounting: Whatever information the management according gets, They are of the financial accuracy of the management decisions is based on the correctness of this information. If financial data is not reliable then management accounting will not provide correct analysis. this effectiveness limited to the reliability of those sources.


1.Lack of knowledge: For taking a sound decision it is necessary that the management must have knowledge of various fields like accounting, statistics, economics, taxation, production, engineering and so on. But it has been observed that the person who is making the decision may not have comprehensive knowledge of all such subjects. 



2.Lack of continuity and Co-ordination: In order to make the conclusions drawn by management accountant meaningful, they must be implemented in the organization at various levels. But in actual practice, they lose their significance because it is not feasible to implement such conclusions. 


3.Lack of objectivity: There is every possibility of personal bias and manipulations from the collection of data to the interpretation stage in financial accounting. Thus, it loses objectivity and validity.



4.Costly: The Installment of a management accounting system in a concern requires large organizations and a wide network of rules and regulations and thus requires a heavy investment. 



5.Evolutionary Stage: The management accounting is in a recent origin and still in an evolutionary stage. New theories and new techniques are being introduced every now and then. Thus, Essential to keep a continuous track for the latest theories and their application. 



6.Effect of time element: The information received in management accounting is all past and by the time the information and statistics are introduced. The situations are all changed and this condition puts the organization in difficulties.

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