Responsibility Accounting -UGC NET

                            Responsibility Accounting,

Definition:- an accounting system that collects, summarizes, and reports accounting data relating to the responsibilities of individual managers

Horngren has defined responsibility accounting as, “a systemof accounting that recognizes various responsibility centers throughout the organization and reflects the plans and actions of each of these centers by assigning particular revenues and costs to the one having the pertinent responsibility.”

Concept And Meaning Of Responsibility Accounting

Responsibility accounting is a system of dividing an organization into similar units, each of which is to be assigned particular responsibilities. These units may be in the form of divisions, segments, departments, branches, product lines and so on.
 Responsibility accounting refers to the various concepts and tools used by managerial accountants to measure the performance of people and departments in order to ensure that the achievement of the goals set by the top management. 

Significance of Responsibility Accounting:-

 Easy Identification:-
With the help of individual responsible managers we can Easy Identify that this performance is satisfactory or unsatisfactory.
 Motivational Benefits:-
If a system of responsibility accounting is implemented, considerable motivational benefits are assured. .
Data Availability:-
A mechanism for presenting performance data is provided. A framework of managerial performance appraisal system can be established on that basis, besides motivating managers to act in the best interests of the enterprise.
 Information:-
Relevant and proper information is available from departmental managers and all are responsible for them to make it accurate.

Objective of Responsibility Accounting:-

Following are objectives of Responsibility Accounting.

•  To determine the contribution that a division as a sub unit makes to the total organization.

• To provide a basis for evaluating the quality of the divisional managers performance. Responsibility accounting is used to measure the performance of managers and it therefore, influence the way the managers behave.

•  To motivate the divisional manager to operate his division perfectly with the basic goals of the whole organization.

Responsibility Centres:-

For Control purposes, responsibility Center are generally Categorized into :-
1. Cost Centre.
2. Revenue Centre.
3. Profit Centre.
4. Investment Centre.

1. Cost Centre
A responsibility of cost centre is cost centre where the manager is accountable (Considered) those costs which are under his control but not for its Revenue. Only those costs are charged to cost centre which are controllable by the manager of the cost centre.
2. Revenue Centre:-
A responsibility Centre is a Revenue Centre in which manager controls revenues but does not control cost of production / service. Revenue centre may control on selling prices, product
mix and promotional activities.
3. Profit Centre:-
 “Under profit centre, manager determines the profit of the centre with the help of Revenue and the cost center.”
4. Investment Centre:-
. “Under Investment centre, a manager is responsible for sales revenues and cost and with addition is responsible for some capital investment, this performance is measured in terms of profit as related to capital base. The manager of an investment centre is always interested to earn a satisfactory return. The return on Investment may be fixed for some period of time.”