The following are the important limitations of financial accounting:
• No detailed cost information: Financial accounting does not provide detailed information for each product, process, job or operation.It only provides information regarding income and expenditure, assets an liability of the organization on a particular date.
• No classification of cost: Financial accounting does not classify cost into direct and indirect, fixed & variable, controllable, uncontrollable, normal and abnormal cost etc. It only divides expenditure in to two categories as Capital and Revenue.
• No helpful in price fixation: Financial accounting does not provide adequate information for fixation of selling prices of the product produced or services rendered by the business. It is not also able to prepare tender or quotations.
• No control on cost: Financial accounting does not provide proper system of controlling to various elements of cost, that is material labor and expenses. Cost control procedure can be adopted by setting standards, but it lacks in financialaccounting.

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Limitations of Financial Accounting
Advantages of accounting discussed in this section do not suggest that accounting is free from limitations.

Following are the limitations:

Financial accounting permits alternative treatments
Accounting is based on concepts and it follows " generally accepted principles" but there exist more than one principle for the treatment of any one item. This permits alternative treatments with in the framework of generally accepted principles. For example, the closing stock of a business may be valued by anyone of the following methods: FIFO (First-in- First-out) ,LIFO (Last-in-First-out) ,Average Price ,Standard Price etc., but the results are not comparable.

Financial accounting is influenced by personal judgments
'Convention of objectivity' is respected in accounting but to record certain events estimates have to be made which requires personal judgment. It is very difficult to expect accuracy in future estimates and objectivity suffers. For example, in order to determine the amount of depreciation to be charged every year for the use of fixed asset it is required estimation and the income disclosed by accounting is not authoritative but 'approximation'.

Financial accounting ignores important non-monetary information
Financial accounting does not consider those transactions of non- monetary in nature. For example, extent of competition faced by the business, technical innovations possessed by the business, loyalty and efficiency of the employees; changes in the value of money etc. are the important matters in which management of the business is highly interested but accounting is not tailored to take note of such matters. Thus any user of financial information is, naturally, deprived of vital information which is of non-monetary character. In modern times a good accounting software with MIS and CRM can be most useful to overcome this limitation partially.

Financial accounting does not provide timely information
Financial accounting is designed to supply information in the form of statements (Balance Sheet and Profit and Loss Account) for a period normally one year. So the information is, at best, of historical interest and only 'post-mortem' analysis of the past can be conducted. The business requires timely information at frequent intervals to enable the management to plan and take corrective action. For example, if a business has budgeted that during the current year sales should be Rs. 12,00,000 then it requires information whether the sales in the first month of the year amounted to Rs. 10,00,000 or less or more? Traditionally, financial accounting is not supposed to supply information at shorter interval less than one year. With the advent of computerized accounting now a software like HiTech Financial Accounting displays monthly profit and loss account and balance sheet to overcome this limitation.

Financial Accounting does not provide detailed analysis
The information supplied by the financial accounting is in reality aggregates of the financial transactions during the course of the year. Of course, it enables to study the overall results of the business the information is required regarding the cost, revenue and profit of each product but financial accounting does not provide such detailed information product- wise. For example, if business has earned a total profit of say, Rs. 5,00,000 during the accounting year and it sells three products namely petrol. diesel and mobile oil and wants to know profit earned by each product Financial accounting is not likely to help him unless he uses a computerized accounting system capable of handling such complex queries. Many reports in a computer accounting software like HiTech Financial Accounting which are explained with graphs and customized reports as per need of the business overcome this limitation.


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