Question

Explain the controllability principle and exception by reporting. Explain in detail with examples

Answer 1

The principle of controllability states that managers should only be evaluated on elements that are within their control.Research literatures on responsibility accounting point to the fact that responsibility accounting and the controllability principle cannot be made independent of one another. The relationship becomes obvious when both are looked at together; responsibility accounting holds the manager responsible for a particular division but the controllability principle ensures that the managers are held responsible only for factors that they can control.

exception by reporting states those instances in which actual performance deviated significantly from expectations, usually in a negative direction. The intent of the report is to focus management attention on just those areas requiring immediate action. For example, an exception report could point out those instances in which expenses were higher than the budget, or where production levels were lower than the production plan.