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Definition

Responsibility accounting

Responsibility accounting is a part of management accounting that involves accumulating and reporting revenges and costs on the basis of the manager who has the authority to make the day-to-day decisions about the items.

Under responsibility accounting, a manager’s performance is evaluated on matters directly under that manager’s control. Responsibility accounting can be used at every level of management in which the following conditions exist.

  1. Costs and revenues can be directly associated with the specific level of management responsibility.
  2. The costs and revenues can be controlled by employees at the level of responsibility with which they are associated.
  3. Budget data can be developed for evaluating the manager’s effectiveness in controlling the costs and revenues.
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