Responsibility Accounting is a system of control by delegating and locating the responsibilty for costs.It is similar to any other system of cost such as standard costing or budgetary control but with greater emphasis towards fixing of the responsibility of the persons entrusted with the execution of specific jobs.
- targets are set.
- there is a appraisal system on a continuous basis.
- the difference between standard and actual performance i.e variance is reported to the higher management.
- the appropriate corrective measures are taken and intimated to the executive or responsibility centre.
Responsibility Centres refers to the units of an organisation that is headed by a responsible manager.Each manager is responsible for the performance of his/her unit. There are manly three responsibility centres:
- Expense Centes. records only the expenses and not the revenues. This is due to the reason that sometimes it is not possible for the firm to measure the output in terms of monetary terms such that in case of finance departments’ contribution to the company.
- Profit centres. takes both the expense as well as revenues into considerations. The output of responsibility centre may be meant for internal consumption or for outside customers.
- Investment centres. it involves holding the concerned manager responsible for use of the assets in the optimum manner as well as for revenues and expenses.