Responsibility Accounting
P Swartz UNAM
Responsibility centres
Divisionalisation
Decentralisation
Goal congruence
Responsibility accounting
Return on Investment (ROI)
ROI and Decision Making
Residual Income (RI)
Terminologies
Term
Definition
Decentralisation
Division of a large enterprise into more
controllable units
Responsibility centre
Defined unit or units of an enterprise for which
the manager is responsible for the activities,
costs and possibly also the profit and
investments
Cost centre
Represents a section or segments of a section
for which managers are responsible for the
costs that originate there
Profit centre
Managers are held responsible for the control
of costs and income. Inter departmental sales
prices are known as transfer prices
Investment centres
Manager responsible to control income, costs
and investments
Divisionalisation
Organisation structure may be
functional
divisionalised (with functional within)
mixed (with central services)
Divisionalisation tends to lead to
decentralisation
But extent of decentralisation varies
