Limitations of Online Earnings

Limitations of Online Earnings

When we say online earning, it means creating a quality content on your web site or blog and make money by registering with ad-sense or other web advertising agencies like info links, chatika etc. The limitation of online earning for blog writer and web site owners have been explained below

1.    A Lot of Time

Online earning requires a lot of time for research and creating quality content. This is not about writing only, but quality writing or content is critical for online earning. A quality article may take a couple of days. It means if you are eyeing 100 quality articles for your site and each article takes 2 to 3 days, then, it will take almost 200 to 300 days to develop a quality blog or site with 100 articles.

2.    A Lot of Effort

Online earning requires a lot of effort as well. This is not about writing few articles, you need to write a good number of articles to earn money online. For example you want to earn $ 300 per month, then you need to write at least 100 Quality articles, which attract 50 visit per day i.e. 100x 500= 5,000 Visitor, this will earn approximately 300$ to $500 per month.

3.    Writing is a Skill

Writing is a skill and first of all you need to polish that skill, and then go for writing. It is not easy to explain even simple thing in your own words without such skill. You are required to explain the things in an effective way without copying the words from books and other articles. (Copying is prohibited for online earning)

4.    Google is Decider

Google is leader in online earning, and if Google rejects or disqualify your site or blogger for some technical reasons (you are not following ad sense guidelines). Then your all effort is wasted, because other online earning site is going to frustrate you with their earning rates and policies.

5.    Long Term Dream

Online earning is a long term dream, and people can be millionaire, but such people are one or two out of million people trying to be millionaire. You need a lot of effort and long time to get desired results. Some time it may take several years to generate reasonable traffic for your blog.

6.    Writers are not SEO

Many people just write and does not know how to write (does not apply SEO tips), other people write little, but know how to write (apply SEO Tips), the second one is more successful with little effort.

Limitations of Index Number

Limitations of Index Number

Index number construction involves number of limitation or problem which includes purpose specification, data collection, and base selection.

1.    Index number Purposes

Index number purpose definition is first step in index number construction. The purpose of index number calculation or construction must be clear. The index number calculated for one purpose cannot interpret used for other purpose.

2.    Data Collection

Index number calculation requires a lot of data and therefore a lot of resources are required to collect data. It is not only the data collection, but more importantly the accuracy of data, and therefore a great care is required during the lot collection of data.

3.    Index Number base Selection

Index number base selection is also a difficult task, there are number of consideration for index number base selection. There are advantages and disadvantages of each base selection method, therefore a careful analyses is required for selection of right base.

4. Index Number only Estimates

Index number results are only estimates and cannot explain or represent the actual situation. Thus index number should not be over relied for decision making.

5. Manipulation is Possible

Index number can easily be manipulated . for example a desired result can be produced by selecting a base year. 

Limitations of Barter System

Limitations of Barter System

Limitation of barter system has been explained below;

1.    Only Essential Goods are Produced

In barter system only essential and limited goods are produced, only those goods are produced which have a wide and known or established demand. There is no market for luxury goods in the barter system due to low demand.

2.    Effective for Limited Population

Barter system can work only for a limited or small population. This system work in a well integrated society, where every person knows the demand of the society and thus can effectively plan its production.

3.    No Market Dynamics

In barter system market dynamics of demand and supply cannot work properly, rather barter system based on intensity of demand & negotiation between interested parties. One of the main reasons of market lacking is lack of standard goods.

4.    Storage Issues

In barter system value is stored in goods, but many goods are perishable in nature and cannot be stored for a long period, moreover, storage also requires a huge space. Therefore storage of goods is one of the main limitations of barter system.

5.    No Standard Price & Value

There is no standard price concept in the barter system , furthermore barter system does not support any pricing concept, good are being exchange for different goods, and thus  determining the standard  price of goods nearly impossible in barter system.

6.    Credit Transaction not supported

Barter system does not support the credit transaction, because it is very difficult to establish future value of good, even establishment the current value of goods is difficult task in the barter system. Thus there is no concept of future transaction in barter system.

Limitations of GNP Measurement

Limitations of GNP Measurement

GNP is widely used to calculate the overall grwoth of the economy, howerver, this system have number of limitations. These limitations have been explained below

1.    Self Provided Services Are Not Included

GNP does not take into account self provided services, for example if you have repaired your own motorcycle, then this service will not be included because you have not paid any amount for such service.

2.    Domestic Service Are Not Included

Household services form a big portion of total services performed during the year, but this service is not included in GNP calculation. So it is more appropriate to say that GNP is only reflecting the paid services in the economy.

3.    Illegal Activities have no record

GNP also does not take into account the illegal activity, because such activities are not reported . In some countries theses service (smuggling) form a major economic activity.

4.    Vague indicator of performance

Some countries have a huge output, but have a very low living standard . Therefore some countries have started to maintain physical quality of life as performance measurement of national progress.

5.    Reflect only overall performance

GNP reflects only overall performance of the economy, and therefore does not reflect actual situation. Increase output is an indication of increase level of income of whole nation, but in fact this increased income is shared by  few families (industrialist).

Limitations of Fiscal Policy

Limitations of Fiscal Policy

Fiscal policy an important tool used by the government to control the ecnomic situation with country. However , there are number of limitations associated with fiscal policy. These limitations have been explained below

1.    Identification of Economic Condition

It is not an easy task to immediately judge the situation of economic condition i.e. depression or boom. A lot of data is required to judge the prevailing economic condition and normally data is collected semi annually or annually for detail analyses and reports. Thus fiscal policy measures cannot be timely introduced to control the situation.

2.    Trade Cycle Dynamic in Nature

Economic condition or Trade cycle is a dynamic in nature (changes with time), therefore a fiscal measure may not be relevant to a dynamic situation. The time period of a trade cycle cannot be estimated and therefore fiscal measure are difficult to implement in continuously changing situation.

3.    Taxes Imposition is not easy

It is not an easy task to impose taxes, because taxes not only require the parliament approval, but may also result in business community resentment & reaction. However, a reduction in taxes is relatively easier, but still requires time for approval from the parliament.

4.    Long Term Impact

Fiscal policy measure will take time to produce results and especially long term project requires more planning before implementation. Only huge project can change the situation (depression into boom), but huge project require a lot of planning and take start with lower pace.

5.    Expansionary Policy is always favorite

Politician always loves the expansionary policy in any situation, because no one loves taxes in the universe, so effective role of fiscal policy reduced due to this biased approached. politician are reluctant to implement contractionary fiscal policy despite the need.

6.    Interest Rate will Nullify the effect

Government will require more funds for expansionary policy and go for bank borrowing, this will create competition between government & private sector for debt, and interest rate will jump (increase) and such increase rate will reduce private investment. Therefore desired results will not be achieved.

Limitations of Double Entry System

Limitations of Double Entry System

Limitations of double entry system can be explained in terms of high cost, limited scale operation, technical job, not error free.

1.    High Cost Option

First limitation of double entry system is its high cost. Double entry system involves number of cost i.e. cost of experience manager, cost of accounting software, stationary cost etc. Thus this system is not recommended /feasible for small businesses.

2.    Does not Suit Small Scale Organization

Double entry system does not suit to a limited operation, because it involves a lot of costs, and small scale organization cannot afford such system. Thus double entry system on one side is a basic requirement for both small and large organization, However , only large organization can afford this system.

3.    Complex System

Third limitation of double entry system is its complexity. Double entry system can only be handled by an experience manager; otherwise, it can produce horrible results. An experienced and technical sound accountant would be required to maintain the the double entry system.

4.    Not Error Free

Double entry system cannot be considered a 100% error free option. There are number of mistakes which cannot be detected by the double entry system. This system can only detect single impact mistakes (which effect one side of trial balance).

Limitations of Single Entry System

Limitations of Single Entry System

Limitations of single entry system may be explained in terms of lack of structure, lack of standard rules, lack of reliablity, lack of accaptablity etc. These limitations have been explained below

1.    Lack of  Structure

Single entry system is not a structure system; rather it is a practice of people to maintain the record in accordance with their convenience & knowledge. Thus this single entry system does not have any proper structure.

2.    Lack of Standard Rules

Single entry system lack standard rules. In fact single entry system is no system, rather a self maintained book keeping. Small businessman keep the record as per their understanding knowledge and convenience. Thus single entry record of every businessman vary from other businessman.

3.    Lack of Reliability

Single entry System cannot produce accurate results. Single entry system is not based on principles and therefore no reliance can be placed on the information produce by the single entry system.

4.    No Acceptability

Single entry system is not an acceptable or recognized system. This is not an standard system, and every organization maintain such system according to his own choice and formats.

5.    Financial Reporting not Possible

Financial results cannot be easily calculated from single entry system. A lot of effort and assumption are required for preparing financial statement, even then, those financial statement are not reliable.

Limitations of Market Penetration Pricing

Limitations of Market Penetration Pricing

Penetration pricing strategy to get high market share by reducing price does not hold true in all circumstances. There are some limitations of this strategy i.e. high competition in the market, high growth opportunities, quality of product, and brand role.

1.    Competitor Will React

Penetration pricing strategy does not work in competitive market, because in high competitive market, competitor will react immediately, and thus desired market share cannot be attain by redacting prices.

2.    Growth Encourages Entry

Penetration strategy cannot stop the new entry in the market, because growth opportunities will encourage people to invest in the industry to get their share out of growing market. Therefore penetration strategy will not prevent new entry in markets which have high growth potentials or expectations.

3.    Quality Does Matter

Price is not the sole factor for capturing the market share. Quality of product is also an important factor, and people are ready to pay high price for improved quality.Therefore improved quality at lower price is the best strategy to capture the market share, instead of just focusing on price reduction.

4.    Brand Name Play Role

It is not easy to compete with the good brand by lowering the price. People are ready to pay more for brand reputation. competing with a reputable brand by lowering prices is not a suggested option.

Limitations of Residual Income

Limitations of Residual Income

Limitations of residual income may be expressed in terms of accounting performance measurement, size of project, understandability.

1.    Accounting Performance Measure

Residual income is accounting performance measure, and accounting profit can easily be manipulated by the management by adopting different accounting polices & procedures. Accounting profit are subject to management biased, therefore cannot be considered a good performance measuring tool.

2.    Size Influences

Residual income is greatly influenced (affected) by the size of the capital employed. Therefore it cannot be used to compare the performance of investment center with different size. Larger size investment center (large capital employed) will always show the improve performance than other investment center.

3.    Difficult to Understand

Residual income method is difficult to understand & apply. This method cannot be easily applied and require a deep accounting and financial management knowledge. Accountant may not be interested in this method due to its rarely used terminologies.

4. imputed interest Rate Decision

   Imputed interest rate decision requires a lot of expert knowledge of financial management.        Moreover, there are numbers of rates is available for imputed interest rate and management      has to decide to use one of them as interest rate.

Limitations of Market Transfer pricing

Limitations of Market Transfer pricing

In market transfer pricing, the market price is used for internal transfers. The main advantage of using this method is fair price method. This method can only be used, when an external market exists. There are some limitations of market transfer pricing, which have been explained below

1.    Market Price Changes

First important limitation of market transfer pricing is its continuous fluctuation.Market price continuously changes over the period of time and therefore cannot be used as standard for transfer pricing.

2.    Market Price Non Availability

Second limitation of market transfer price is non availability of market price.Market price may not be available for many products (specially for technical Goods). Therefore market pricing cannot be widely used by the organization.

3.    More than One Market Price

There may be more than one market price for a product i.e. retail price, or wholesale price. It is difficult to establish that what market price is to be used as market price.

Limitations of Negotiated Transfer Pricing

Limitations of Negotiated Transfer Pricing

Under this method transfer prices between department and division are decided on the bases of negotiation between these departments. This type of pricing is regarded as fair deal, because both parties are satisfied.

1.    Conflict

First limitation of negotiated transfer pricing is conflict creation  between departments. failed negotiation between departments may result in conflict. This conflict situation is not favorable for organization, because conflict may bring disintegration within the organization.

2.    Use of Domination

Under negotiated pricing, the powerful or dominating division may influence the transfer price in its favor; therefore the advantage of fair deal may not be achieved in such circumstances.

3.    Time Consuming Job

Negotiation pricing is a time consuming effort and  would consume a lot time of management. This time can be used on an issue which can bring real profit to the organization.

4.    No Real Benefit

Negotiated pricing will not bring any real advantage or benefit to the organization because transfer pricing is just a method of measuring performance of divisional performance. It has no direct role in improving the profitability of organization.

Limitations of Break Even

Limitations of Break Even

Limitations of break even analyses can be explained in term single product analyses, fixed cost assumption, unit sale price and variable cost assumptions. Limitations of break even analyses have been explained below

1.    Single Product Analyses

First limitation of break even analyses is its limited scope.  Break even analyses is a single product analyses. It holds well for a single product, it does not work even for two products. Therefore in modern business, where most industries are involved in producing more than one product, break even analyses cannot be used.

2.    Fixed Cost is not always fixed

Break even analyses assumes that fixed cost will remain fixed for all time, which is not the real world scenario. In practical business environment fixed cost remains unchanged up to certain limits, and then it take an upward jump. For example factory storage is not sufficient for all level of material; similarly more supervision is required for increased production level.

3.    Sale Price is not Constant

Break even another limitation is its wrong assumption of constant unit sale price. In practical business, it is not possible to keep the sale price constant. Demand rule says that for increased demand (sales), you need to decrease the price. Sales price is a changing phenomenon that is not recognized in break even analyses.

4.    Unit variable cost is not Constant

Break even analyses other important limitation is its assumption of constant unit variable cost . Again variable cost cannot be kept constant at all level. In increased production level it tends to fall due to economies of scale and in extreme production, it will rise again. (More supervision is required).


Limitation of Break even analyses are listed below

• It is a single product analyses.
• Its constant unit sales price assumption is not valid.
• Its constant variable price assumption is not correct in real business world.
• Its constant fixed cost assumption is also not valid.