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What are the limitations of Financial Statements?
Limitations of Financial statements are:
- Financial statements are available after a specific period of time is over.
- They give the information about the historic facts which may not be sufficient from the decision making point of view.
- Financial statements which are based on financial accounting are interim reports and cannot be the final ones.
- While preparing Balance sheet various assets and liabilities are shown at historical prices as they are made on the going concern principle which may affect the profitability statement as well as in the incorrect provision for depreciation.
- Only those transactions are recorded which can be expressed in monetary terms
- Financial statements prepared may be useful for normal users in the normal conditions.
- Financial statements by them self does not mean anything unless the information stated therein is properly studied, analyzed and interpreted.
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