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Financial statements give an idea about the financial position of the company, however, there are some limitations of the financial statements. The first limitation is that a financial statement ignores the productivity and the skills of the employees in an organization. Management Decision Analysis Report gives an idea about it but financial statements are unable to evaluate the skills which a company has. Secondly, balance sheet does not give timely and relevant information because it is based on historical costs and it does not give a fair idea about the current position of the company. There are different accounting measurement systems therefore, use of different techniques by different companies can make the comparisons of financial statements difficult. Moreover, income statement is considered a fiction because cash is king and income statement ignores this fact.
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