Responsibility accounting

It is a system of control where responsibility is assigned for the control of costs.

Persons are made responsible for the control of costs.

Proper authority given to persons so that they are able to keep up their performance.

Performance not upto the standards – persons are personally responsible for it.

Emphasis is on men rather than on systems.

“Responsibility accounting is the name given to that aspect of the managerial process dealing with the reporting of information to facilitate control of the operations and evaluation of performance.”

FeaturesInputs and outputs or costs and revenue

Use of budgeting

Identification of responsibility centres

Performance reporting

Human aspect

Responsibility centres For effective control, a large firm is

usually divided into meaningful segments, departments or divisions.

These divisions of an organization are called responsibility centres.

Represent the sphere of authority or decision points in an organization.

Types of responsibility Centres

Types

Cost Centres

Profit Centres

Investment Centres

Advantages of Responsibility AccountingAssigning of responsibilityImproves performanceHelpful in cost planningDelegation and controlHelpful in decision making