What are the major limitations of a statement of financial position as a source of information for...

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What are the major limitations of a statement of financial position as a source of information for users of general purpose financial statements? Discuss at least three limitations XXXXXXXXXXword limit)

David · Accepted Answer

What are the major limitations of a statement of financial position as a source of information for 
users of general purpose financial statements? Discuss at least three limitations. (400-500 word 
limit) 
ANSWER 
A statement of financial position of a business gives useful information about the state of affairs 
and the assets and liabilities of the business to the users thereof. It presents a summary of the 
financial balances of a business to the users. The statement of financial position however suffers 
from certain major limitations discussed ahead. 
1. The statement reports only those assets which have been acquired by the business. If the 
business has developed an asset in-house the cost of which is not too significant the same 
is not reported even though the actual benefit derived from the asset may be very high 
and useful. 
2. Fixed assets of the business are shown at historical value.

What are the major limitations of a statement of financial position as a source of information for users of general purpose financial statements? Discuss at least three limitations XXXXXXXXXXword...

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