“responsibility Accounting”

Responsibility accounting is the third type of management accounting information.  It is called by that name because the accounting information is structured according to organization units, which are responsibility centers.  Responsibility accounting collects and reports information that is used in an important management function and management control.

RESPONSIBILITY ACCOUNTING

DEFINITION

An information system designed to a measure the performance of that segment of a business for such a given manager is responsible is often referred to as “responsibility accounting system”.

A responsibility accounting system should reflect the plans and performance of each organization.  It is designed to provide timely information for decision making and for the evaluation of performance.  In addition to being timely such information should highlight deviations of actual performance from planned performance so that appropriate corrective action can be taken.  All items of expense are the responsibility of an individual and should be charged to that individual at the point of origin.  In other words, expenses should be viewed as the responsibility of the manger of the organizational unit where costs originated.  The manager at this level is authorized to incur expenses and he is in a position to exercise direct control over them.