A company's Accounting Information Systems involve the collection,
storage and processing of financial and accounting data used by
internal users to report information to different stakeholders, such as
creditors, investors and tax authorities (Tuovila Alicia, 2020). An
accounting information system consists of varying tools used to
achieve several objectives. Tools such as balanced scorecards,
responsibility accounting and graphs are used to provide information
to management for decision making purposes.
What is Responsibility accounting
Responsibility accounting system is the method used in accumulating
costs and revenue data that is converted into useful information used
by management in its decision-making process (Srivastav K Ashish,
2022). It is a system of accounting in which individuals are given the
responsibility of being accountable for specific outcomes in an
assigned responsibility center in a company's operation. A company
typically has four types of responsibility center, the cost center,
revenue center, profit center and investment center (Srivastav K
Ashish, 2022).
Cost Center: In the cost center individuals are assigned responsibility
for cost control. They are responsible for controllable cost. For
example, if a company's manufacturing division budget a cost of
$150,000 to produce 5000 units of lawn movers for the year and at
the year's end the actual cost of production is $153,000, the
responsibility manager would be accountable to provide an
explanation to management for the excess cost.
Revenue Center: In the revenue center, the area of responsibility is
towards revenue. In a company this responsibility is assigned mainly
to its sales team (Srivastav K Ashish, 2022). Eg. If Toyota Motors sets
a target for revenue for its Rav 4 line at $10,000.00 for the year and
at year end only $9,900,000.00 in revenue was reached, the manager
for this revenue center would be accountable to provide an
explanation for the shortfall.
Profit Center: In this center performance is measured by looking at
the correlation between cost and revenue (Srivastav K Ashish, 2022).
For example, a company's manufacturing division would be
considered a profit center. The raw material used in production is
considered as the cost element and the finished product that is sold
is the element that produces revenue.
Investment Center: In the investment center a manager would be
assigned the responsibility for using the company's assets in the most
efficient way in order to earn the most favorable return on capital
invested (Srivastav K Ashish, 2022).
References
Srivastav K. Ashish, (2022),
What is Responsibility Accounting
- b
Responsibility Accounting - Meaning, Types and Examples
(wallstreetmojo.com)
Tuovila Alicia, (2020),
Accounting Information Systems
- Accounting
Information System (AIS): Definition and Benefits (investopedia.com)
