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Limitations of Management Accounting

LIMITATIONS OF MANAGEMENT ACCOUNTING

Management accounting suffers from some limitations. They can be summarised as follow :

(i)                 Limitations of basic records. Management accounting is generally concerned with the rearrangement of data. The correctness of management accounting depends upon some of the accounting records such as financial accounting records, cost accounting and other records. Normally, they have their own limitations which are also the limitations of management accounting.

(ii)               It is only a tool. Management accounting is a mere tool for management. At any  time, any of the important decisions, and corrective steps or measures are taken  by the management itself and not by the management accountant.

(iii)             Personal bias. Personal prejudices and bias affect the objectivity of decisions.

(iv)             Expensive. The installation of management accounting systems in an organization requires a huge amount of capital. So it is not suitable for the small scale organization.

(v)               Supplies only data. The important function of the management accounting is to supply only data and not to influence the decisions. It can only give the information and not the prescription.

(vi)             Evolutionary stage. Management Accounting is only at a developmental stage. It could not reach the final stage. So the decision at the developmental stage is not a standardized one.