AutoCAD is a drafting software and requires dimensions to be specified on the drawing which has its overall size depend on the how big or small the drawing is.
AutoCAD has unlimited space in which one can draw the drawing but in real life, one has to either print it or get it into the physical world so, the one has to prefix the size of the drawing.
What is LIMITS command?
The LIMIT command in the AutoCAD helps you to set the working space or canvas size into which the complete drawing can be made. When you write LIMITS in the command bar, you will be prompt for Lower Left Corner coordinate location. Normally you can set it to (0,0) while the drawing's Upper Right Corner coordinate require entering coordinate of the point on the upper right corner of the drawing area.
If you are drawing a square of size 20x20, you should enter (0,0) in lower left corner coordinate and (25,25) as an upper right corner. The extra value of 5 is given for white space around the drawing.
If you do not set the limit of the drawing, still you can draw the drawing but then you need to change the other things accordingly like text size and dimension etc.
Even you can set the size of paper like A4 by using the LIMITS command which helps you in printing the drawing later on.