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Responsibility Centers and Financial Control Problem

You have been asked to speak about the topic of responsibility centers to a group of executives at a conference.

1. For this speech you should select a company/business (of your choice) that you are familiar with and briefly describe it.

2. Give three examples of responsibility centers in that business.

3. Describe how these responsibility centers interact.

Solution Preview

Use of responsibility centers is one of the most established and widely used techniques in financial control. Responsibility accounting breaks a large organization into smaller, more easily manageable units known as responsibility centers. Each unit is looked upon as a small business. Managers bear an element of responsibility for the performance of their respective centers.

The principle of controllability applies to responsibility accounting. The presumption underlying controllability is that every dollar earned or dollar spent is under the control of, and can be traced to, at least one manager.

Responsibility accounting represents decentralization of a business enterprise. It is comparable to a political policy of ...

Solution Summary

This explains the concept of responsibility centers with examples. Specifically, it discusses responsibility centers in the context of an organisation. References are used for this 444 word response.