Responsibility Accounting

Abstract

We now return to the accounting library and its use in performance evaluation. The idea is to cull from the library those accounting measures we find useful for evaluating some specific manager. This gives rise to what is termed responsibility accounting. A particular manager is held responsible for, is held accountable for, some identified array of accounting measures. In this way the organization assigns responsibility for various accounting outcomes, such as manufacturing cost, product profitability, and division return on investment. Stated differently, responsibility accounting is a scheme in which the accounting measures by which each manager’s performance will be evaluated are identified. Responsibility, so to speak, is assigned. Each item in the accounting library is associated with a list of managers who bear responsibility for that item.