Responsibility Accounting

Responsibility accounting is an accounting information system that involves identifying subunits known as responsibility centers, determining their objectives, and measuring their performance. It is most useful in decentralized organizations in which lower levels of management are given autonomy in decision-making.

In this unit, you will learn about the concepts of responsibility accounting, decentralization, and transfer pricing. You will also learn about the different performance evaluation tools used in evaluating responsibility centers.

Lesson 1

What is Responsibility Accounting?

Responsibility accounting is a system that involves identifying responsibility centers and their objectives, and evaluating the performance of those centers. Read more..
Lesson 2


In a decentralized organization, lower levels of management are given a great degree of autonomy and independence in making decisions on matters under their responsibility. Read more..
Lesson 3

Cost Variance Analysis

The cost variance analysis is the most common performance evaluation tool when evaluating a cost center. Managers of cost centers are evaluated based on costs they can control. Read more..
Lesson 4

Segment Margin Analysis and Segment Reporting

Business segments such as divisions and product lines should be evaluated based on revenues and costs that are directly traceable to them. Read more..
Lesson 5

Performance Evaluation

The two most widely used tools used in evaluating investment centers are: return on investment and residual income. Aside from them, there are other measures that can be employed. Read more..
Lesson 6

Transfer Pricing

Some product lines or business segments tend to under-perform compared to others. In deciding whether to add a new product line or drop an existing one, the management must consider relevant costs. Read more..
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