Applications are the most important utility in Android. Classified into two types, system apps and user apps. System apps are the one that is preinstalled,and removing some system apps cause device instability. User apps are those installed from playstore or other sources. Everybody uses application along with internet or WiFi. And on usage, application consumes them and creates application data and cache. My question is that, whether there is any reset point or limit for creating app data. For example, I am currently using WhatsApp continuosly, and presently app data reached 350MB. Will it have any auto reset by itself at say 1GB. What will happen if app data reaches a greater value?
No. That would be awful. App data is your data, the data you create using the app. Deleting it when it reaches a certain size would be like Windows deleting all your documents if you have more than 100. You can choose to clear an app's data through the Settings at any time, but this will delete everything you created through the app (except if the app syncs your things to the cloud, such as Tumblr or Google Docs). Usually, it's better to manage an app's storage through the app itself, which should offer more control over what you delete.
"Cache" is just that: a cache, or temporary copy, of data that's safely stored elsewhere. It's up to the individual app to correctly classify things as "data" or "cache", but you can expect that clearing an app's cache doesn't actually lose any data: it just means some things that were stored in the cache might need to be downloaded again.
The only limit for how much data an app can have is how much storage your phone has. If you use it all up, you won't be able to install or update apps, or store more data.