5 Questions
What is the primary purpose of responsibility accounting?
To make managerial control easier
What are the different types of responsibility centres in an organization?
Cost centre, revenue centre, profit centre
What is excluded in responsibility accounting?
Uncontrollable costs
What is communicated to the managers of responsibility centres?
Set of goals to achieve
What does responsibility accounting help in?
Budgeting and various analysis
Study Notes
Responsibility Accounting
- Primary purpose: to evaluate the performance of individual managers or departments in an organization, by assigning costs and revenues to specific responsibility centers.
Types of Responsibility Centers
- Cost centers: focus on controlling costs and expenses.
- Profit centers: focus on generating revenue and profit.
- Investment centers: focus on investments and returns on investments.
- Revenue centers: focus on generating revenue.
Exclusions in Responsibility Accounting
- Excludes uncontrollable costs, such as external factors, to ensure fair evaluation of managers' performance.
Communication to Managers
- Managers of responsibility centers are communicated with:
- Performance reports, highlighting deviations from budget and targets.
- Variances analysis, to identify areas for improvement.
Benefits of Responsibility Accounting
- Helps in:
- Evaluating the performance of individual managers or departments.
- Identifying areas for cost reduction and improvement.
- Encouraging accountability and motivation among managers.
- Facilitating decision-making by providing relevant information.
Test your knowledge of responsibility accounting with this quiz. Explore the objectives, advantages, and steps of responsibility accounting to enhance your understanding of this important management tool.
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