Question

How does responsibility accounting ensure accountability in organizations? In your opinion, do you think tying compensation to responsibility center performance is a good idea?

Answer 1

As responsibility accounting is based on the fixation of responsibilities of the employees on the specified centers. In other words we say that under this system of accounting first of all we need to establish the responsibility centers then accountability of the employees are fixed accordingly. So we can say that responsibility accounting is much better tool in ensuring accountability in organizations due to clear fixation of the responsibility of the employees.

Tying compensation to responsibility center performance is a good idea because it will help in motivating the hard working employees, who are more accurate in delivering own’s responsibilities. In other words we can say that when we try to compensate on the basis of responsibility center performance then it will help in minimization of irregularities and there will be higher efficiencies in the organization. That is why it is a good idea.