Limitation of Management Accounting Classes and Notes

Limitation of Management Accounting – What are the limitations of Managerial Accounting

Based on accounting information: Management accounting is based on data and information provided by financial accounting and cost accounting. As such correctness and effectiveness of managerial decision will depend upon the quality of data provided by cost and financial accounts.

Lack of knowledge: The use of management accounting requires the knowledge of a number of related subjects like accounting principles, statistical, economics, etc. But it has been observed that the person who is taking the decisions may not have comprehensive knowledge of all such subjects.

Proper management action: A management accountant may provide information and figures in the most appropriate form to the management. It is the management and the people in the organisation who are to use the figure by understanding their language and act accordingly. The same set of figures, if not acted upon by the management, becomes useless or if misunderstood by the management, may lead to unwise actions.

Intuitive Decisions: Though it has been realized that scientific decisions must be taken into consideration for the quantitative techniques yet because of simplicity and personal factors, the management has a tendency to persistence intuitive decision-making.

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