ACCA MA Syllabus D. Budgeting - Responsibility accounting - Notes ^{1 / 3}

Budgetary control and responsibility accounting are seen to be inseparable

Each manager must have a well-defined area of responsibility and the authority to make decisions within that area.  

This is known as a responsibility accounting unit.  

An area of responsibility may be structured as

1. A cost centre 

   – the manager is responsible for cost control only

2. A revenue centre 

   – the manager is responsible for revenues only

3. Profit centre 

   – the manager has control over costs and revenues

4. Investment centre 

   – the manager is empowered to take decisions about capital investment for his department.

A common problem is that the responsibility for a particular cost or item is shared between two (or more) managers.

For e.g. the responsibility for material costs will be shared between production and purchasing managers.

It is important that the reporting system should be designed so that the responsibility for performance achievements is identified as that of a single manager.