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.

An accounting system that

provides information . . .
Relating to the
responsibilities of
individual managers.

To evaluate
managers on
controllable items.

A
A subunit
subunit in
in an
an organization
organization that
that is
is
headed
headed by
by aa responsible
responsible manager.
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 Center
Center
S
Segment
egment
has
has control
control
over
over the
the
incurrence
incurrence of
of
costs.
costs.

The Paint Department

in an automobile plant.

Revenue
Revenue
Center
Center

Segment
Segment
is
is responsible
responsible
for
for the
the revenue
revenue
of
of aa unit.
unit.

The Reservations
Department of an airline.

Profit
Profit
Center
Center

Segment
Segment has
has
control
control over
over
both
both costs
costs
and
and revenues.
revenues.

Company-owned restaurant
in a fast-food chain.

Investment
Investment
Center
Center
Segment
Segment has
has
control
control over
over
profits
profits and
and
invested
invested capital.
capital.

A division of a
large corporation.

Cost
Center
Profit
Center
Investment
Center

Evaluation Tool
Cost
standards

Contribution
income
statement
Rate of return
on invested
funds

Responsibility Reports

C
o
st

Responsibility
Reports
Prepared for each
individual who
has control over
revenue or
expense items