Responsibility Accounting

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Introduction Responsibility accounting is the practice that focuses on providing financial information useful in evaluating efficiency and effectiveness of managers or department heads, on the basis of financial performance directly under their control. Responsibility accounting is also based on the assumption that every cost incurred must be the responsibility of one person somewhere in the company. Examples could include; the cost of rent being assigned to the person who negotiates and signs the rental agreements; or the cost of an employee’s salary being the responsibility of that person’s direct manager, or human resources manager (S. Bragg, 2010). The importance of responsibility accounting is that it’s essential to very large organizations, but extremely advantageous as well for small to medium sized (SMB) businesses in general, because this method of accounting allows a business to explain whose, what, when, where and why, and justify if necessary, money is invested and spent concerning a company’s finances. There is also the aspect of better management through collection of pertinent data and reporting of this data from each individual department within larger organizations. There are many examples of companies that today use responsibility accounting principles. HP Utilization Individual responsibility itself is the underlying idea behind this type of accounting. Responsibility focuses on performance measurement. Basically the idea is that large organizations are almost impossible to manage as a single concern, and must be separated into controllable parts. These parts or divisions are referred to as responsibility centers including: revenue centers, cost centers, profit centers and investment centers. This approach all... ... middle of paper ... ...nting? definition and meaning. Retrieved from www.accountingtools.com/: http://www.accountingtools.com/questions-and-answers/what-is-responsibility-accounting.html References Hafeezur, R. (2011, December 8). Management Accounting - Responsibilty Accounting. Retrieved from http://hubpages.com/: http://hubpages.com/hub/Management-Accounting-Responsibility-Accounting Martin, J. (1987). Responsibilty Accounting Summary. Retrieved from http://maaw.info/: http://maaw.info/ResponACCSum.htm Newsweek. (2011, September 16). 100 Best Global Brans. Retrieved from www.businessweek.com/: http://www.businessweek.com/interactive_reports/best_global_brands_2009.html S. Bragg. (2010, June 7). What is responsibility accounting? definition and meaning. Retrieved from www.accountingtools.com/: http://www.accountingtools.com/questions-and-answers/what-is-responsibility-accounting.html

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