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Presented by: Mahesh Pandey
MBA
Responsibility Accounting is a management system that aims to develop performance measures by which segment managers are evaluated.
The essence of responsibility accounting is to communicate the right information to the right person at the right time.
Relating to theresponsibilities of
individual managers.
To evaluatemanagers on
controllable items.
An accounting system thatprovides information . . .
A subunit in an organization that is headed by a responsible manager.
A subunit in an organization that is headed by a responsible manager.
Under responsibility accounting responsibility centers are broadly categorized as:
Cost centers – segments whose managers are held responsible only for costs but not for revenue or investments.
Revenue centers- segment is responsible for the revenue of particular unit or center.
Profit centers – segments whose managers are held responsible for both costs and revenues but not for investments.
Investment centers – segments whose managers are held responsible for the capital invested as well as the profits made in the segment.
Cost Cost CenterCenter
SSegment egment has control has control
over the over the incurrence of incurrence of
costs.costs.
Cost Cost CenterCenter
SSegment egment has control has control
over the over the incurrence of incurrence of
costs.costs.
The Paint DepartmentThe Paint Departmentin an automobile plant.in an automobile plant.
Revenue Revenue CenterCenter
SegmentSegmentis responsibleis responsiblefor the revenue for the revenue
of a unit.of a unit.
Revenue Revenue CenterCenter
SegmentSegmentis responsibleis responsiblefor the revenue for the revenue
of a unit.of a unit.
The ReservationsThe ReservationsDepartment of an airline.Department of an airline.
Profit Profit CenterCenter
Segment hasSegment has control overcontrol over bothboth costs costs
and revenues.and revenues.
Profit Profit CenterCenter
Segment hasSegment has control overcontrol over bothboth costs costs
and revenues.and revenues.
Company-owned Company-owned restaurant in a fast-restaurant in a fast-food chain.food chain.
Investment Investment CenterCenter
Segment has Segment has control over control over profits and profits and invested capital.invested capital.
Investment Investment CenterCenter
Segment has Segment has control over control over profits and profits and invested capital.invested capital.
A division of aA division of alarge large corporation.corporation.
CostCoststandardsstandardsCostCoststandardsstandards
Contributionincomestatement
Contributionincomestatement
Rate of returnRate of returnon investedon investedfundsfunds
Rate of returnRate of returnon investedon investedfundsfunds
Evaluation ToolEvaluation ToolCostCost
CenterCenterCostCost
CenterCenter
InvestmentInvestmentCenterCenter
InvestmentInvestmentCenterCenter
ProfitCenterProfit
Center
Cost
Responsibility Reports
Responsibility Reports
Prepared for each individual who
has control over revenue or
expense items