Question

What is responsibility accounting? why should noncontrollable costs be excluded from perfor-mance reports prepared in accordance with responsibility accounting?

Answer 1

Assigning responsibility is done through a system of control called responsibility accounting. Non-controllable costs are excluded from performance reports prepared in accordance with responsibility accounting because costs and revenues are connected with individuals for improved control and performance appraisal.

Responsibility accounting is a type of management accounting that oversees all of a company's internal accounting, budgeting, and management. Supporting all of a company's planning, costing, and responsibility centers is the main goal of this accounting.

Responsibility accounting serves as a tool for decision-making as well as a means of control. The data gathered by this technology aids management in organizing its upcoming operations. Setting future goals for distinct cost centers is also aided by their historical performance.

Since costs and revenues are linked to specific people for better management and performance evaluation, non-controllable costs are removed from performance reports created in accordance with responsibility accounting.

To learn more about responsibility accounting refer to:

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