Responsibility accounting is a system of dividing an organisation into similar units, each of which is to be assigned particular responsibilities .These units maybe in the form of divisions ,segments ,departments ,branches ,product lines and so on. Each department is comprised of individuals who ensure that the people in the department are doing well achieve the goal 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 goals set by the top management.
Types of responsibility centre
The basic idea of responsibility accounting is that large diversified organisations are difficult,if not impossible ,to manage has a single segment .They must be separated into smaller divisions . The divisions or segments are referred to as responsibility centre.
A responsibility centre is a division of the organisation for which manager is held responsibility . Responsibility centres are of four types--revenue centre, profit centre and investment centre ,cost centre .
Cost Centre is location person or item of equipment approve of this for which cost may be ascertained and you should for the purpose of control.
profit centre is defined has an activity centre of a business organisation.chief of such a centre is fully responsibility for all costs. Revenue'sand profitability of it operation .The main objective of the centre is to maximize the centre profit.
Revenue centre:- revenue centre is strictly defined as an organisational unit for which manager is accountable only for the generation of revenues and has no control over setting selling prices or budgeting costs
Investment centre:-investment centre is an organisational unit in which the manager is responsibility for generating revenues and planning and controlling expenses .In addition, the centres the highest feasible rate of return on the capital employed.
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