Question

Which of the following is a limitation of accounting?

• A. Less scope for fraud and theft
• B. Does not record all events
• C. Documentary evidence
• D. Provides control over assets

Hint:

Accounting records only measurable financial transactions, not qualitative factors like employee morale.

Answer 1

The Correct Option is B

Topic: Nature and Limitations of Accounting
Step 1: Understanding the Question:
The objective is to find a drawback or weakness of the accounting process from the given options.
Step 2: Detailed Explanation:
Options A, C, and D are actually "Advantages" of accounting (it reduces fraud, acts as proof, and helps manage assets).
A major "Limitation" is that accounting only records transactions that can be measured in money (financial nature).
It ignores important qualitative events like employee morale, management changes, or customer satisfaction because they cannot be expressed in currency.
Step 3: Final Answer:
The limitation is that it "does not record all events" (specifically non-monetary ones).
Final Answer: Does not record all events.