Responsibility accounting, Managerial Accounting

Responsibility Accounting

This is a term used to define the measuring of performance of decentralized units, using account results. Responsibility accounting recognizes various decision centers throughout an organization and trace costs (revenues, assets and liabilities) to the individual managers who are primarily responsible for making the decisions about the costs in question. A responsibility centre is a unit in an organization headed by a manager having direct responsibility for its performance. Examples of responsibility centers comprise cost centre, profit centre, and investment centre. These centers are defined below:

Cost Centre:

Cost centre is a production service location activity or item of equipment whose costs may be attributed to cost units. It is therefore any unit of the organization to which cost can be attributed.

Managers in the cost centre have control over various controllable costs (That is costs incurred in the centre) but may have no control for any alterations apportioned from other cost centers.

Performance measurement in a cost centre can be accomplished through variance analysis or through efficiency measures such as output/input ratio.

Profit Centre:

A profit centre is a subunit of an organization such as a division of a company to which both revenue and costs are assigned so that the profitability of that subunit can be measured. It is also termed as strategic business unit.

Managers in a profit centre have control over costs, and revenue decisions. Performance measurement in a profit centre can be accomplished through the use of profit margin or contribution/sales ratio.

Investment Centre:

An investment centre is a subunit of the organization where managers have control over cost, revenue and some investment decisions. Managers can buy some assets so as to increase profitability.

Performance in an investment centre is measured by ratios such as return on investment which relates the profit earned to the amount of capital invested. The performance can also be measured from absolute measures like residual income.

Posted Date: 12/8/2012 4:50:21 AM | Location : United States







Related Discussions:- Responsibility accounting, Assignment Help, Ask Question on Responsibility accounting, Get Answer, Expert's Help, Responsibility accounting Discussions

Write discussion on Responsibility accounting
Your posts are moderated
Related Questions
solutions for (POS) slow printing of sales tickets and unpredictable action of cash drawers. when credit approvals delayed the checkout process or when the computer was down, thus

Risk : Risk includes circumstances or events that may or may not take place though whose probability of occurrence can be predicted from the past records. In this atmosphere, t

State the Opportunity cost The net selling price, rental value or transfer value which could be obtained at a point in time if a particular asset or group of the assets were to

Funded debt to total capitalization ratio The ratio establishes a link among the long term funds raised from outsider and total long term funds available in the business. The

WHAT IS THE NPV OF ADOPTING THE LOCKBOX SYSTEM

Pike Corporation paid $100,000 for a 10% interest in Salmon Corp. on January 1, 2010, when Salmon''s stockholders'' equity consisted of $800,000 of $10 par value common stock and

Factory Layout The first stage of implementing the JIT manufacturing techniques is to rearrange the factory floor away from the batch production functional layout towards a pro

discuss the applicability of an operating cycle in vegetable growing in a low developed country like Uganda- Africa

Contribution margin Analysis Contribution Contribution is theĀ  difference between sales and variable cost or marginal cost of sales . if may also be defined as the excess

we want to realize our job dreams, we need to think about ourselves as products to be marketed, and in order to do this, we need to contextualize ourselves within the five Ps of ma