Question

Responsibility accounting. In the subject line of your post, include the name of the article that you read. Post a link to that article with your initial post, and provide a summary and a reaction to the article. The summary should be approximately 250 words, and the reaction should be approximately 150 words. The summary should describe the major points of the article, and the reaction should demonstrate your interpretation of the article and how you can apply that knowledge.

Answer 1

MEANING OF RESPONSIBILITY ACCOUNTING -

“Responsibility accounting as that type of

management accounting that collects and

reports both planned and actual accounting

information in terms of responsibility centre”.

Robert N Antony

Not only the costs but also the revenues are assigned.

That is why it is defined as ‘a system of accounting that recognises various responsibility centres throughout the organisation and that reflects plans and actions of each of these centres by assigning particular revenues and cost to one having pertinent responsibility.

This system defines the specific responsibility of the departmental supervisor as well as functional managers for jobs which for jobs should be performed. Practically, it is the management that has to chalk out the plan and control the activities relating to the responsibility centre.

It follows the basic principle like any other control system, e.g., Budget or Standard Costing. The only difference is that the fixation of responsibility lies in the hands of individuals or departments

Principles of Responsibility Accounting:

The following principles of Responsibility Accounting are taken into consideration in order to:

(i) Fix up the target on budgets or standards or estimates according to responsibility;

(ii) Evaluate the performances, i.e., to compare the actual results with the budgets for ascertaining the variances;

(iii) Analyse the variances for fixing responsibility on the responsibility centres and make reports to the top management.

(iv) Take corrective actions and communicate these to the persons concerned.

The primary objective of Responsibility Accounting, however, is that the responsibility of each individual should usually be defined and each one should know what responsibilities are assigned to him, and, at the same time, what sort of performance can be expected relating to the cost which is controllable.

Therefore, this system is fitted into the different responsibility centres in order to evaluate the performance of each centre. That is why it lays stress on planning and controlling costs and also on prompt reporting of performances.

Advantages of Responsibility Accounting:

The following advantages are expected from Responsibility Accounting:

(i) It introduces sound system of control.

(ii) It ensures budgeting in order to compare the result of an operation between the budgeted figures and the actual ones.

(iii) It helps the management to make an effective delegation of authority and required responsibility as well.

(iv) It will help also to increase the interest of the managerial executives since they are asked to explain the reasons of derivation of actual from the budgeted figures.

(v) Structure of reports may be simplified.

Link of the above article : http://www.yourarticlelibrary.com/accounting/responsibility-accounting/responsibility-accounting-meaning-principles-and-advantages/66095

Response to the above article -

The implementation and maintenance of responsibility accounting system is based upon information relating to inputs and outputs. The physical resources utilized in an organisation; such as quantity of raw material used and labour hours consumed, are termed as inputs. These inputs expressed in the monetary terms are known as costs. Similarly outputs expressed in monetary terms are called revenues. Thus, responsibility accounting is based on cost and revenue information.

Effective responsibility accounting requires both planned and actual financial information. It is not only the historical cost and revenue data but also the planned future data which is essential for the implementation of responsibility accounting system. It is through budgets that responsibility for implementing the plans is communicated to each level of management. The use of fixed budgets, flexible budgets and profit planning are all incorporated into one overall system of responsibility accounting.

The whole concept of responsibility accounting is focused around identification of responsibility centres. The responsibility centres represent the sphere of authority or decision points in an organisation. In a small firm, one individual or a small group of individuals, who are usually the owners may possibly manage or control the entire organisation.