Responsibility accounting is defined as “A system of reporting
financial results on the basis of managerial responsibilities within an
organization” (Romney, Steinbart, Summers, & Wood, 2020 pg. 584).
In other words, this tool is performance-based. It is utilized to help
minimize the possibility of managers making poor or biased decisions.
There are some important factors that need to be in place for this
tool’s relevance. A hierarchy of authority needs to be in place and
each manager needs to identify the items over which they have
control (
Managerial accounting, n.d
). These factors allow the reports
to be individualized and itemized for specific managers. For example,
reports would be created for each manager controlling specific
projects or departments. The text also provides a visual of the reports
on page 584 figure 18-14. It displays the first reports of the president
and general manager, they oversee all departments. The second
report is for the Vice president of production. You notice that the
reports are connected, meaning that each report has a line item from
the previous report.
Responsibility accounting can be used by managers to find problems
within the organization. For example, if a deficit occurs, the utilization
of this tool can pinpoint the areas of concern. In the floor manager
report, findings could show that the payroll is over budget, triggering
the investigation as to why. Thus allowing the floor manager to
identify the problem and then provide a solution. So, if unauthorized
overtime is occurring, the manager can pinpoint to whom and
determine if hiring, retraining, or termination is required.
Reference
Romney, M. B., Steinbart, P. J., Summers, S. L., & Wood, D. A. (2020).
Accounting Information Systems (15th ed.). Pearson Education (US).
https://mbsdirect.vitalsource.com/books/9780135573082
Managerial accounting. 9.2 Responsibility Accounting in
Management | Managerial Accounting. (n.d.). Retrieved December 22,
2022, from https://courses.lumenlearning.com/suny-
managacct/chapter/responsibility-accounting-in-management/
