Explain the nature, purpose and scope of responsibility accounting
According to the text book Managerial Accounting a responsibility accounting system is set up to help control costs assigned to specific units. The website accounting tools.com, goes further to describe it as a system that compiles revenue, cost and profit information at the level of those individual managers most directly responsible for them. The responsibility accounting system involves a performance report. This performance report accumulates and reports costs and expenses that a manager is responsible for and their budgeted amounts.
Differentiate between various costing systems and various forms of responsibility centers
According to MUSE, cost serves two purposes, planning and evaluation. For planning, cost might be a reference point for determining selling price of a product, for evaluation, it could be used to compare actual costs to budgeted costs. Multistage process and job order costing systems are similar in assigning labor, material, and manufacturing support activity to products. The two systems are different because with a job order cost system, production requirements vary across different jobs, and are measured for individual jobs, where as in a multistage process, production requirements are the same across jobs.
Responsibility centers are identifiable segments within an organization for which individual managers have accepted authority and accountability. These centers define what assets and activities each manager is responsible for. The managers of each center is responsible for ensuring they are managing and maintaining their centers budgets. A tool that is used for reporting is the responsibility report. This report compares the responsibility centers budgeted performance with the actual performance, similar to the variance budget. This report only contains