Responsibility Accounting and Cost Control

9088 Words Feb 27th, 2009 37 Pages
Topic:Responsibility Accounting and Cost Control.

Subject:

Management control systems

Index:

|Sr.No |Topic |Page No |
|1 |Meaning of Responsibility Accounting |3 |
|2 |Steps involved in Responsibility Accounting |5 |
|3 |Responsibility Centres |6 |
|4 |Cost Centres v/s Responsibility centres
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Under this system, divisions or units of an organization under a specified authority in a person are developed as responsibility centres and evaluated individually for their performance.” David Fanning defines Responsibility Accounting as a system or mechanism for controlling the wider freedom of action ‘that executive - decision centre manager in other words - are given by senior management and for holding those executives responsible for the consequences of their decisions.’ Robert Anthony defines Responsibility Accounting as “that type of management accounting that collects and reports both planned and actual accounting information in terms of responsibility centres.” Responsibility Accounting focused main attention on responsibility centres. The managers of different activity centres are responsible for controlling the costs of their centres. Information about costs incurred for different activities is supplied to the persons in charge of various centres. The performance is constantly compared to the standards set and this process is very useful in exercising cost controls. Responsibility Accounting is different from cost accounting in the sense that the former lays emphasis on cost control whereas the latter lays emphasis on cost

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