Question

Explain the meaning of the terms ‘responsibility accounting’ and ‘the controllability principle’ and their implications for performance measurements and management.

Answer 1

RESPONSIBILITY ACCOUNTING:- Responsibility accounting is a system that involves identifying responsibility centers and their objectives, developing performance measurement schemes, and preparing and analyzing performance reports of the responsibility centers. Responsibility accounting involves gathering and reporting revenues and costs by areas of responsibility.

Controllability principle:- The controllability principle stipulates that the evaluation of a manager should be based only on elements that are under the manager's control.By empirically analyzing the effects on managerial performance, this paper explores managers' responses to the application of the controllability principle.