Financial statements suffer from several limitations. They do not reflect the current situation as they are prepared on the basis of historical cost, and the values of assets and liabilities do not reflect current market situation due to changing purchasing power of money.

They provide only aggregate information and not detailed information, which may not help users much in decision-making. Moreover, they contain bias as they are the outcome of recorded facts, accounting concepts, conventions, and personal judgements made by accountants, making the financial position depicted unrealistic.

Financial statements also lack qualitative information such as industrial relations, labour relations, quality of work, and employee satisfaction. Vital information like loss of markets and cessation of agreements, which have a bearing on the enterprise, is also missing from the balance sheet.