(The title of this article is the Definition of Responsibility Accounting, Papers, Journals, Function, Information, Concepts, Implementation, as well as Strategy and Activity Based)
Overall responsibility center is forming a hierarchy within the organization. At the lowest level of this form of accountability we get as sexy, regular rotation, as well as other work units. Whereas at higher levels we get in the form of departments or divisions which usually is a collection of several smaller units of the organization coupled with the staff and other management personnel. Accounting has appeal for many leaders as it can facilitate the transfer of (delegates) decision-making, as any middle managers are given power over a smaller part (sub-units) together with an authority and other things accounting provide basic tools to conduct an evaluation of the ability of each manager as supreme leader will get powerful information. Accounting emphasizes accountability to the party that has the most complete information.
Definition of accounting has been widely discussed in the literature, especially the management accounting. Some experts in the field of accounting more writing accounting as follows below according to Charles T. Hongren:
"Responsibility accounting is an accounting system that recognizes various responsibility centers on the whole organization and reflect the plans and actions of each center was to establish certain income and expense for the center which has responsibility pertinent also called the accounting profit or accounting activities". (1993, p. 307)
According H.S. Hadibroto, gives the following definition:
"Responsibility accounting is an accounting system that is customized to be able to supervise the management efficiency for something specific part or to the officers responsible for the cost efficiency of the responsibility". (1991, p. 6)
Based on the above definition, the authors tried to draw the conclusion that the accounting is:
An accounting system that exists in an organization to function as a tool of management control.
An accounting system that compiles and reported revenues and expenses for the responsibility center.
Responsibility Accounting Function
Accounting by function is as a performance assessment tool and provide or generate feedback that will come a time when that operation can be improved.
a. Revenue Performance Assessment Center
Accounting information that is used as a performance measure is a revenue center managers revenues. If the revenue center just sell products or services to parties outside the company, revenue measurement carried out easily, ie by multiplying the quantity of products or services sold by the selling price charged to the customer. Center for performance measurement of income, all income derived both from the sale of products or services to other responsibility centers within the company, used as performance benchmarks revenue center.
b. Performance Assessment Centre Fee
Accounting information that is used as a performance measure is the cost of the cost center manager. Problems arising in the use of cost as a performance measure cost center managers are:
1). Cost behavior problems
Often there is poisoning the variability with uncontrolled or not a fee. Variability of the cost is the behavior of costs in connection with changes in the volume of activity. Costs being out of control or not concerned with the relationship costs with the authority held by certain managers. The assumption that variable costs as controllable costs and fixed costs as the cost of unrestrained by profit center manager is a mistaken view. In determining whether or not the cost of control, need to be connected between a certain fee to the authority held by the cost center manager.
2) Issue costs by cost center relationship
In conjunction with cost center, costs are divided into two categories: direct costs and indirect costs. Direct costs are costs that benefit only enjoyed by a particular cost center. Indirect costs are costs that benefits enjoyed by more than one cost center. In measuring performance cost center, the cost of direct and indirect costs were calculated as a measure of performance should be what is the cost of control by the cost center manager. Uncontrolled costs are direct costs and indirect costs that can be influenced significantly by the manager with authority has.
3) Issue periods
In the long run, all costs can basically be returned by certain managers in the organization. The cost of the policy is the cost of control in the short term. But be aware that there are some costs that have a level of control for short term and long term.
4) Issue a double responsibility
In the cost center manager performance measurement, which is under the jurisdiction of more than one cost center manager, used to measure the performance of each relevant cost center manager. Producing cost center manager responsible for the services it generates services with minimum cost, while the user cost center manager responsible for minimizing the use of producer services center services.
c. Performance Assessment Profit Center
The profit center manager is accountable given the authority to control the company and the cost of the responsibility center. Because of the profit, which is the difference between revenue and costs, can not stand alone as a measure of the performance of a profit center, it needs to be connected with the investment earnings are used to produce such profits.
d. Performance Assessment Investment Center
Investment center is the responsibility center manager in an organization that assessed his achievements on the basis of the profit earned associated with the investment. Source of funds owned by a company is usually limited, therefore, management must assess whether the profit generated by a division and a company's overall worth the investment. Investment performance measurement center has the following objectives:
Provide an evaluation tool investment projects past and future, both individually and as a whole.
Provide useful information for division managers and head office managers to make the right investment decisions for the division and the company as a whole.
Motivate managers to always monitor the division of assets, liabilities and capital divisions are used as the basis for determining the amount of investment.
Measuring achievement and investment center managers to measure the achievements of the division as an economic entity.
As a basis for the granting of incentives to any investment center managers according to their achievements.
Basic Concepts Responsibility Accounting
The concepts below are the requirements to establish and maintain a system of accounting:
Accounting is based on the grouping of responsibilities (departments) managerial at every level in an organization with the aim of forming the budget for each department. Individuals who heads the classification of accountability must be responsible and accountable for the costs according to the costs that may or may not be controlled by the head of department to department. Generally the costs are directly charged to the department, except for fixed costs, the cost of which can be controlled by the department manager.
The starting point of the accounting system located at the organization where the scope of authority have been determined. Authority underlying the accountability of certain costs and with consideration and cooperation between supervisors, department heads, or the manager, the fee set forth in the company's budget.
Each budget must clearly show the costs under control by a personal question. The chart of accounts must be adjusted so that the recording is done at the expense of control or ditanggungjawabi based within the scope of authority delegated.
Usability Responsibility Accounting
Usefulness for management accounting are:
a. Accounting information as a basis for preparing the budget.
The budget process is basically a process of determining role in achieving corporate goals. In the process of budget preparation applied who will play a role in carrying out most activities of the company and the achievement of the objectives set out also the resources provided to enable managers play a role in achieving the company target was measured with a standard monetary unit in the form of accounting information. Therefore, the budget is only possible if the available accounting information, which measure various values of the resources provided for any manager who was instrumental in achieving the target set in the budget year. Thus, the budget that contains accounting information which measures the value of the resources provided for in the budget for the manager who was given the role to achieve corporate goals. In the process of budget preparation, accounting information serves as a delivery role to a manager who was given a role in the achievement of corporate goals.
b. Accounting information as an assessment of the performance of managers accountable.
Accounting information is information that is important in the process of planning and control activities of the organization, because the information is emphasizing the relationship between the information with the manager responsible for the planning and realization. Control can be done by providing a role for every manager to plan income or expense which it is responsible, and then present information and the realization of income or expense according to the manager in charge. Thus, accounting information reflects the scores made to implement the manager's role in achieving the objectives of the company.
c. Accounting information as motivating managers.
Accounting information is a significant part, partly accounting information will have an impact on the motivation of the manager through the following two paths:
Pose a direct effect on the motivation of managers to influence the likelihood of effort rewarded. If the reward structure partly based on accounting information, the manager believes that its performance will be measured by accounting information (past information) will be awarded the most performance over accounting information. Performance will likely receive this award that motivate managers to improve business.
Indirectly accounting impact on motivation through value appreciation. Accounting information (such as information about past) used to measure the performance of managers. If the reward structure is largely based on accounting information, managers will gain satisfaction. Satisfaction with the award he received was influenced by the assessment on the appropriateness of the award manager. The level of satisfaction of managers on the award he received the high and low impact on the value of the award. This last factor affecting motivation to strive manager.
d. The information allows management accounting activities. Management requires a separation of activities and not enhancing value addition and identifying resources consumed by both types of such activity. By presenting the cost information is separated into an addition and not an addition to the cost value, management can:
Obtain cost information is not an addition to the value that describes the amount of waste that is being experienced by the company to meet the needs of consumers.
Obtaining the costs instead of enhancing the value that allows them to concentrate their control of the activity is not an addition to the value.
Obtain information about costs for adding value that enables them to make improvements enhancing the efficiency of the activity of value.
e. Accounting information management program allows monitoring of the effectiveness of management activities require cost information on an ongoing basis to monitor the activity of program management activities. By presenting the cost information is separated into costs enhancer and not for adding value in the form of comparisons from period to period, management can:
Monitor the effectiveness of the management program effectiveness. To reduce and eventually eliminate the activity is not an addition to the value, it takes a long period, the results of which should be realized in the form of cost reductions. Therefore, by following the development of costs is not an addition to the value of one accounting period to another accounting period, the management fees is not an addition to the value in the form of a comparison between accounting periods.
Formulating strategic decisions. Activity management program provides an overview of how the cost savings that can be achieved within a certain period. Based on the information obtained from the cost savings that management activity, management can formulate strategic decisions, such as determining the selling price of products, the selection of manufacturing technology used to make more efficient value-adding activities.
Limitations of Responsibility Accounting
Limitations of accounting information is only used for:
a. Performance assessment
The performance assessment is the determination of periodic operational effectiveness of an organization, part of the organization, and employees based on objectives, standards and criteria established in advance.
Budgeting is the process of making a work plan for a period of one year which is expressed in monetary units and units of other quantitative.
Central responsibility basically created to achieve a certain goal, either a single target or target compound. These goals often we refer to as an objective that we must achieve. In this regard, it is understandable if the goals of each individual in each center of responsibility it should be proposed that the harmonious and balanced in order to achieve the general objectives of the organization decided in a strategic planning process which in this case is assumed to have been established prior to the beginning management control process begins.
a. Revenue Center (Revenue Center)
At the center of earnings, we measure the level of output in the form of value for money, but no formal attempt made to link the input or the output costs that result. Revenue center especially many of us encounter in marketing organizations. Budget or sales target has been prepared or planned in advance, where the point is to measure transactions of sales already made or orders the purchase that have been recorded in the ordinary course revenue center as a whole and also to record the results of the activities of each salesperson carry out such activities.
Then the concrete results of all these activities we compare with the specified value previously set a budget.
b. Expenditure center
Expenses are the responsibility of the central hub, where the input or the cost is measured in terms of money, but the output is not we measure in terms of money. In general there are two kinds of expenditure centers, ie the size of the central expenditure and the expenditure center where the value of the expenditure that can be measured less (discretionary).
1). Measured Or Planned Financing Center (Engineered Expenses Center)
The costs are usually expressed as measurable standard cost. If someone has set the standard for a specific financing facility, then the measurement of the magnitude of the output or result of the passage can be done by altering the physical quantity of the standard cost per unit, in respect of certain fees earned. Calculation of costs in fact anti considered the standard cost values before, if there is a difference in the value of the difference in the magnitude of the value will be analyzed to infer what caused these differences. Success of the job performance of managers of central financing assessed on the basis of how far they are always the same, or even lower than those of standard costs which have been previously defined.
2). Discretionary Funding Center (Not Measured)
Some organizational units generate output that can not be measured by the amount of value for money. Most of these units is usually in the form of massive value for money. Most of these units is usually in the form of unit administrative staff, purchasing and product development units and some units in marketing activities. Efforts to control process units discretionary funding began with the enactment of a budget or annual plan approved by management. Further financing realization that we compare with the value of the budget. Therefore, the comparison of the magnitude of the level of input that we do not measure the magnitude of the value of money, then basically this effort we can not do as a way of measuring performance to complete and therefore it is in this way can we use as a basis for measuring overall on business assessment of the overall manager.
c. Profit Centre (Profit Center)
Profit center is the centerpiece of accountability that achievement is measured by profit center managers accountable lead. Thus both inputs measured by monetary value, which means that input is measured in terms of cost and output measured in revenue. Profit centers are generally found in organizations classified by divisions earnings profit (divisional organization). Division or unit managers profit center managers determine the selling price, marketing strategies and production policy. The amount of investment in this unit can only be proposed by the profit center manager, while a decision is determined by the highest leadership of units existing profit centers.
d. Investment Centre (Investment Center)
Investment center is the responsibility center manager can oversee the achievement of revenue, costs and the amount of investment on assets that existed at the responsibility center. At this responsibility center managers can define and specify the number of accounts receivable, inventory policy, define the purchase of equipment necessary for the production and marketing of their products.
Understanding Responsibility Accounting
7. Implementation Responsibility Accounting
Accounting considers that the control of the organization can be increased by creating a network of centers of responsibility in accordance with the formal organizational structure of the company. The organizational structure reflects the division of authority within the company hierarchy. Through the organizational structure, management implement the delegation of authority to carry out specific tasks to the management further down, in order to achieve the division of labor is beneficial.
If a manager is authorized to carry out something, he will find it has the power to formally act within the scope of its authority and to influence the behavior of their subordinates. However, the authority received from top managers does not mean anything, if that authority is not accepted or acknowledged the existence of subordinate managers.
Unfortunately, many companies often have weaknesses in the delegation of authority issue. The division of authority often overlap (overlapping) responsibilities demanded and often not accompanied by sufficient delegation of authority. If someone is burdened with responsibilities that are not commensurate with the necessary authority to carry out these responsibilities, will be incurred is frustration and reluctance.
Accounting imposes a responsibility to responsibility center managers with the assumption that the manager as if it is a separate individual from another manager. Imposition of responsibility sometimes overlook the fact that there is a group leader in the organization of formal and non-formal, and that the performance of the group that actually measured. Therefore, in the design of accounting systems, to consider the dynamics of the group, which is the strength of the effect on the group's willingness to accept targets that are applied.
Because the responsibility center is the basis for the entire accounting system, the central framework of the entire system of accounting. Central accountability framework must be designed carefully. The organizational structure should be analyzed about possible weaknesses in the delegation of authority contained therein. Responsibility center network can be an effective tool for controlling the organization, if the underlying organizational structure arranged rationally.