According to allbusiness.com, responsibility accounting is defined as a “collection, summarization, and reporting of financial information about various decision centers (responsibility centers) throughout an organization” (allbusiness.com). The article also explains that responsibility accounting helps an organization trace costs, revenues and profits to the individual managers who are responsible for decision making. Responsibility accounting also measures performance of each manager in regards to how he or she manages these costs, revenues, and profits.
I am not sure if my company uses responsibility accounting; however, I will assume the company does due to its many departments. Our company has a research department that I would assume is a cost center. The company also has a cost center for each region to keep track of all costs related to the spending of office materials, travel expenses, and administrative costs. The profit centers within our company is our sales departments and brand team departments. Each brand team deals with different categories of medications. Examples of the different brand team departments are, cardiovascular brand team, the respiratory brand team, the oncology brand team, and the CNS brand team. The different brand teams have different managers who are responsible for the budgets, calculating ROI and implementing appropriate costing systems.
As mentioned in an article in MAAW online, the advantages to responsibility accounting within the company I am employed by fit the reasons explained below.
* “Provides a way to manage an organization that would otherwise be unmanageable.” * “Assigning responsibility to lower level managers allows higher level managers to pursue other activities such as long term planning and policy making.” * “Provides a way to motivate lower level...