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