16.8 Describe The Four Types Of Responsibility Centres In Research
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16.8 Describe the four different types of responsibility centres. A responsibility centre may be defined as a unit of a firm where an individual manager Is held accountable for the unit’s performance. There are four types of responsibility Responsibility centres – costs or expenses centres, revenue centres, profit centres and Investment centres. Cost or expenses centres are responsibility centres whose manager Are normally accountable for only those costs that are under their control. Revenue Centres are responsibility centres where managers are accountable only for financial Outputs in the form of generating sales revenues. A significant increase in managerial Autonomy occurs when unit managers are given responsibility for both production and Sales. Unit within an organization whose managers are accountable for both revenues And costs are called profit centres. Investment centres are responsibility centres whose Managers are responsibility for both sales revenues and costs and, have responsibility And authority to make working capital investment decisions.
16.9 Explain what is meant by the term ‘responsibility accounting’. Responsibility accounting is implemented by issuing performance reports at frequent Intervals that inform responsibility centre managers of the deviations from budgets for Which they are accountable and are