The term for a system of accounting that segregates revenue and costs into areas of personal responsibility in order to monitor and assess the performance of each part of the organization is known as?

The term for a system of accounting that segregates revenue and costs into areas of personal responsibility in order to monitor and assess the performance of each part of the organization is known as?

• A. Responsibility centre
• B. Responsibility accounting
• C. Incremental cost
• D. Controllable cost

Answer: (B)

The idea here is about assigning financial results to the manager who controls a specific part of the business so that performance can be measured and managed. This approach is called responsibility accounting. It underpins the use of responsibility centres—units like cost centres, revenue centres, profit centres, or investment centres—so that each part’s revenues and costs can be tracked, compared to budgets, and assessed for performance. Incremental cost is about the extra cost of a decision, and a controllable cost is one a manager can influence; neither describes the system of reporting and evaluating performance by area of responsibility.

The idea here is about assigning financial results to the manager who controls a specific part of the business so that performance can be measured and managed. This approach is called responsibility accounting. It underpins the use of responsibility centres—units like cost centres, revenue centres, profit centres, or investment centres—so that each part’s revenues and costs can be tracked, compared to budgets, and assessed for performance. Incremental cost is about the extra cost of a decision, and a controllable cost is one a manager can influence; neither describes the system of reporting and evaluating performance by area of responsibility.