ADVANTAGES

OF RESPONSIBILITY
ACCOUNTING

1.Better System of Control

It enables the management to management to delegate
authority to responsibility centres while remaining overall
control with itself

2.Decentralization of Decision Making

It forces the management to consider the organisational
structure to result in effective delegation of authority and
placement of responsibility. So it will compel individual
manager to take right decision

3.Comparison of Performance
It encourages the comparison between Actual
Achievements with Budgeted figures. It compels the
setting of realistic goal

4.Increases the interest of staff

It increases the interest of supervisory staff as they are
answerable about deviations of responsibility centers
which they are responsible

5.Simplifies the structure of reports

Because of exclusion of those items which are beyond
the scope of individual responsibility

Disadvantages
of Responsibility
Accounting

1.If these are absent, no

responsibility accounting system

2.Traditional way of classification of expenses

needs further analysis which becomes difficult.

Principles of Responsibility Accounting

1.A target is fixed for each responsibility centre

and is communicated to the concerned level of
management.

2. Actual performance is compared

with the target.

3. Corrective action is taken by the higher

management and is communicated to the individuals
responsible.

4.The variances from the budgeted plan are

analysed to fix responsibility on the responsibility
centre