Which term describes 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?

Which term describes 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?

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

Answer: (B)

Responsibility accounting is the system that measures and reports the performance of parts of an organization by assigning revenues and costs to managers who have control over them. This approach creates responsibility centres (such as cost centres, revenue centres, profit centres, and investment centres) and uses their performance to assess how well each part of the organization is doing. The idea is to decentralize decision-making and hold managers accountable for the activities they can influence, making it easier to monitor efficiency and drive improvement. The other terms refer to specific cost types or to the unit itself, not to the overarching system of reporting and evaluating performance by responsibility.

Responsibility accounting is the system that measures and reports the performance of parts of an organization by assigning revenues and costs to managers who have control over them. This approach creates responsibility centres (such as cost centres, revenue centres, profit centres, and investment centres) and uses their performance to assess how well each part of the organization is doing. The idea is to decentralize decision-making and hold managers accountable for the activities they can influence, making it easier to monitor efficiency and drive improvement. The other terms refer to specific cost types or to the unit itself, not to the overarching system of reporting and evaluating performance by responsibility.