Responsibility accounting
Responsibility accounting: structuring performance reports around the managers accountable for specific costs, revenues or investments, the basis for cost, profit and investment centres.
See it move
Responsibility accounting sorts managers into four centres by what they control: a cost centre answers for costs only, a revenue centre for revenue only, a profit centre for both, and an investment centre for profit plus the capital invested to earn it. A warehouse cost centre reports a €12,000 adverse variance on a €340,000 budget; an overseas investment centre is judged on its return on capital instead.
Check yourself
A car-parts distributor has a regional sales office that negotiates its own prices and volumes with customers, but it has no control over what it pays its supplying factories for stock. What type of responsibility centre is this sales office?