Disadvantages of Accounting Convention
1. Uncertainty: A lot of accounting rules leave out important details about ideas or transactions that are documented in financial accounts. As a result, they are making it simple for management to manipulate certain numbers with the help of the accountant, such as depreciation and provisions for bad debt.
2. Manipulation: Despite being intended to prevent manipulation, these conventions frequently assist the company’s management in manipulating particular financial data through the reporting process, which presents an inaccurate image of the financial health of the organization.
3. Lack of Consistency: Liabilities and expenses are documented as soon as they happen, but assets and revenue are recorded at cost and transaction completion. They make decisions based on worst-case scenarios, which may not accurately represent the company’s circumstances.