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Responsibility Accounting

Introduction

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.

What's in Here

In this unit, you will learn about the concepts of responsibility accounting, decentralization, and transfer pricing.

You will also learn about the different evaluation tools used in assessing the performance of responsibility centers.

Image link to What is Responsibility Accounting
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.
Image link to Decentralization
Lesson 2

Decentralization

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.
Image link to Cost Variance Analysis
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.
Image link to Segment Margin Reporting
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.
Image link to Performance Evaluation
Lesson 5

Performance Evaluation

Investment centers have control over revenues, costs, and certain assets. Evaluating the performance of investment centers can be performed by using different metrics.
Image link to Transfer Pricing
Lesson 6

Transfer Pricing

When one department sells to another department within the same organization, transfer pricing aims to determine the rate to be charged that would result in a win-win outcome.
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