Question

Explain the relation between organization structure and responsibilty centers.

Answer 1

While establishing responsibility centres, the existing organization structure must be properly reviewed generally, in practice, it requires a change in the existing organization structure. In view of that, below mentioned changes may be quite required in it:

--The responsibility for all the revenues and expenses should be assigned to identified competent people in the organization.
--The accounting system must be modified as per requirements to ensure to accumulate and report revenues and expenses on the lines of assigned responsibilities within the
organization structure.
--An evaluation system based on comparison of expenses and revenues of different responsibility centres with pre-assigned targets must be established: If the required changes are not undertaken in the existing structure of organization, the purpose will not be responsive to the requirements, needed in this connection