3. Responsibility accounting is a system of control where responsibility is
assigned for the control of costs. The persons are made responsible for the
control of costs. Proper authority is given to the persons so that they are able
to keep up their performance.
In case the performance is not according to the predetermined standards then
the person who are assigned this duty will be personally responsible for it. In
responsibility accounting the emphasis is on men rather than on systems.
MEANING OF RESPONSIBILITY
ACCOUNTING
4. Large complex Businesses are divided into responsibility centers enabling
managers to have a smaller effective span of control.
RESPONSIBILITY CENTERS
5. The responsibility is the unit in the organization that has control over costs,
revenues or investment funds.
It is an organization unit for which a manager is made responsible
The center’s manager and supervisor establish specific and measurable goals
for the responsibility centers
The goals should promote the long term interest of the organization.
WHAT IS A RESPONSIBILITY
CENTERS.
6. The accounting System provides information about resources used and
outputs achieved.
This information is used to:
Plan and allocate resources.
Control operations.
Evaluate the performance of centers managers.
THE NEED FOR INFORMATION
ABOUT RESPONSIBILITY CENTER
PERFORMANCE
7. There are four basic types of responsibility centers. These centers
indicates the degree of responsibility the manager has for the
performance of the center.
Cost or Expenses center
Profit Center
Revenue Center
Investment Center
TYPES OD RESPONSIBILITY
CENTERS
Cost Center
Revenue
Center
Investment
Center
Profit Center
8. Cost Centers:
A business section that has
responsibility for controlling costs,
but no control over revenues.
Example: Production Department
in a manufacturing unit, a dry
cleaning business
1. EXPENSES/ COST CENTERS
9. A profit center is a subunit that has responsibility
of generating revenue and controlling costs.
Can be a business division or any of the
functional unit
2. PROFIT CENTER
10. A revenue Center is responsible for selling an agreed amount of products or
services.
It’s manager is usually responsible to maximize revenue given the selling price
(or quantity) and given the budget for personnel and expenses.
3.REVENUE CENTER
11. An investment center is a responsibility
center in which the manager is responsible
for the use of assets as well as for profit.
It satisfies goals of business organization
i.e.
To earn the profit.
4. INVESTMENT CENTERS
Corporate Headquarters
