MBA Finance Question:
What are the limitations of Management Accounting?
Answer:
Limitations of Management Accounting:
1) Management Accounting is based on financial and cost accounting, in which historical data is used to make future decisions. Thus, strength and weakness of the managerial decisions are based on the strength and weakness of the accounting records.
2) Management Accounting is useful only to those people who are in the decision making process.
3) Tools and techniques used in management accounting only provide information and not ready made decision. Thus, it is only a supplementary service.
4) In Management Accounting, decision is based on the manager’s institution as management try to avoid lengthy courses of scientific decision making.
5) Personal prejudices and bias affect the decisions as the interpretation of financial information is based on personal judgment of the interpreter.
1) Management Accounting is based on financial and cost accounting, in which historical data is used to make future decisions. Thus, strength and weakness of the managerial decisions are based on the strength and weakness of the accounting records.
2) Management Accounting is useful only to those people who are in the decision making process.
3) Tools and techniques used in management accounting only provide information and not ready made decision. Thus, it is only a supplementary service.
4) In Management Accounting, decision is based on the manager’s institution as management try to avoid lengthy courses of scientific decision making.
5) Personal prejudices and bias affect the decisions as the interpretation of financial information is based on personal judgment of the interpreter.
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