Responsibility accounting recent developments

The fundamental function of management accounting is facilitating managerial control. Various devices are used by the management in performing this important function. Responsibility accounting is one of the most recent developments in this field. Responsibility accounting has assumed great significance and is rightly described as modern approach to managerial control and reporting. The growth of responsibility accounting is attributed to the realization that the results of operation must be regarded as human responsibilities and not as abstract concepts. While the other control techniques, available under conventional accounting, are directed towards determining the total and unit product cost for the organization as a whole, responsibility accounting lays emphasis on performance of individuals where responsibilities are fixed for persons and divisions accountable for the same. The concept of responsibility accounting is closely related to the systems of budgetary control and standard costing.

The system of costing like standard costing and budgetary control are useful to management for controlling the costs. In those systems the emphasis is on the devices of control and not on those who use such devices. Responsibility accounting is a system of control where responsibility is assigned for the control of cost. The persons are made responsible for the control of costs. Proper authority is given to the persons so that they are able to keep up their performance. In case the performance is not according to the predetermined standards then the persons who are assigned this duty will be personally responsible for it. In responsibility accounting the emphasis is on men rather than systems. For example, if Mr. C, the manager of a department, prepares the cost budget of his department, then he will be made responsible for keeping the budget under control. C will be supplied with full information of costs incurred by his department. In case the costs are more than the budgeted costs, then C will try to find out and take necessary corrective measures. C will be personally responsible for the performance of his department. Responsibility accounting is a system of accounting that recognizes various responsibility centers throughout the organization and reflects the plans and actions of each of the centers by assigning particular revenues and costs to the one having the pertinent responsibility. It is also called profitability accounting.