The Shockley’s diode equation predicts a current-voltage characteristic different from that used by Shockley and Queisser to compute the limiting efficiency of photovoltaic energy conversion under the assumptions of the detailed balance theory. The reasons for such discrepancy are discussed being the neglect of photon recycling effects in Shockley’s diode equation the main cause. This interpretation is crucial to understand the fundamentals on which the computation of the limiting efficiency of solar cells is based. Without photon recycling effects, it can be concluded that the limiting efficiency (one sun) of a gallium arsenide solar cell is 26.8&percent; (with the sun assumed as blackbody at 6000 K) while the true figure is 30.7&percent;, 38.7&percent; as long as the angle of emission of photons from the cell is fully restricted. ©1997 American Institute of Physics.