RESPONSIBILITY

ACCOUNTING
GROUP NO 14 ROLL NO
• PRIYANKA PANDA 2030
• DEVENDRA PRAJAPATI 2049
• AAKASH YADAV 2039
• SIDDHI MANJREKAR 2059
• MUBASSHRA KHAN 2069
• VIJAY SAHANI 2079
 INTRODUCTION
• Responsibility accounting is a kind of
management accounting that is
accountable for all the management,
budgeting, and internal accounting of a
company. The primary objective of this
accounting is to support all the Planning,
costing, and responsibility centres of a
company.
 • DEFINITION
Responsibility accounting is a system of accounting that
recognizes various responsibility centres throughout the
organization and reflects the plans and actions of each
of these centres by assigning particular revenues and
cost to the one having the pertinent responsibility. It is
also called profitability accounting and activity
accounting.
- Charles T Horngren

Client Total's
CONCEPT
• it is used to measure performance of division of an
organization rather than organization as whole.
• responsibility accounting is system of control where
the responsibility is assigned for control of cost. the
persons are made responsible for control of cost.
• responsibility accounting must be designed to suit
existing structure of organization.
$15.000,00
2022 Income
 TYPES OF RESPONSIBILITY
ACCOUNTING

PROFIT CENTER COST CENTER REVENUE

INVESTMENT
CENTER CENTER
EXAMPLES
 COMPONENTS
• Inputs and Outputs – refer to the implementation of responsibility accounting based upon
information relating to inputs and outputs. The resources utilized in an organization, such as the
quantity of raw material consumed and labor hours consumed, are inputs, and the finished product
generated is termed outputs.

• Identification of Responsibility Center – The whole concept of responsibility accounting depends

on identifying the responsibility center. The responsibility center defines the decision point in the
organization. Generally, in small organizations, one person, probably the firm’s owner, can manage
the entire organization.
• Target and Actual Information – Responsibility accounting requires target or budget data and actual
data for performance evaluation of the responsible manager of each responsibility center.

• Responsibility Between Organization Structure and Responsibility Center – A structure with

apparent authority and commitment is required for a successful responsibility accounting system.
Similarly, the responsibility accounting system must be designed per the organization’s structure.

• Assigning Cost and Revenue to an Individual – After defining the authority–responsibility

relationship, cost, and revenue, which are controllable, should be given to individuals to evaluate
their performance.
 THE MAIN ROLES OR
CONTRIBUTION
• DECENTRALIZATION
• PERFORMANCE EVALUATION
• MOTIVATION
• TRANSFER PRICING
• DROP OR CONTINUE DECISION
 OBJECTIVES
• Each Responsibility center is given a target which is
communicated level to the Relevant Management level.
• At the end of the time period,there is a comparison between
target and the actual performance.
• The variations that are detected in the budgeted plan are
examined for filing responsibility to the Center.
• Due Measures are taken by top level Management which is
communicated to the responsible personal.
• The Responsibility for costs does not include the policy cost and
various other apportioned costs.
RESPONSIBILITY REPORT
• A Responsibility Report is prepared for each Manager who
controls a responsibility Center.

• The Reports compares the expectation for the Manager's

Responsibility center with the center's actual performance.

• A typical Report lists the items under the Manger's control,

both the budgeted amount and the actual amount spent for
each item, and the differences between budgeted and actual
amounts (variances).
 USES OF RESPONSIBILITY
ACCOUNTING
1.PERFORMANCE EVALUATION
• This is perhaps the Biggest Benefit with
Responsibility localized, it is possible to
rate individual Manager on a cost basis.

2.DELEGATING AUTHORITY
• Large Business firms can hardly survive without
of delegation Authority.
• By its very nature , responsibility accounting
makes it happen.
3.CORRECTIVE ACTION

• If performance is unsatisfactory, the person responsible must

identified It is only after identification of the erring Subordin
that the corrective action can be taken.

4.MOTIVATION
• Responsibility accounting is the use of acccounting
information for the Planning and control .
• when the Managers know that they being evaluated, they ar
prompted to put their heart and soul in meeting the targets
for them.
5.MANAGEMENT BY OBJECTIVE
• The head of devisions and departments are assigned definite
objectives before the commencemen of the period .
• They are held answerable for the attainment of these targets.

6.MANAGEMENT BY ERCEPTION
• Performance Reporting here is On erceptions on deviations from the
plan. The idea runs throughout the responsibility accounting.

7.HIGH MORALS AND EFFICIENCY

• Once it is clear that rewards are linked to the performance. it
act as a great morale booster.
 ADVANTAGES
• Responsibility accounting establishes a robust
mechanism for cost control
• It makes it easier to compare the accomplishments of pre-
planned goals with real outcomes.

• Individual employees will feel more efficient as their

efforts and accomplishments are evaluated.

• Increases Motivation And Job Satisfaction

• It is Helpful For Cost Reduction And Control

Client Total's
 DISADVANTAGE
• Costly And Complex Accounting System
• Applicable Only For Controllable Costs
• Difficult To Define Responsibility Centers
• Chance Of Employee Frustration Because Of Strict
Supervision
• The tool can only be effective if an outstanding reporting system
is put in place .
• In the absence of a sound structure of the organization, the
responsibility centers cannot be clearly identified.
CONCLUSION