Question

The problem in is that the decentralized managers of different divisons in a company, each acting in the best interest of her or his individual division, might not make a collective decision that is in the best interest of their company as a whole. – Can better ACCOUNTING solve this problem? If so, how? If not, why not?

Answer 1

The problem in decentralisation is that there will be a sense of disagreement among managers often leading to conflicts of interests and thus sense of overall responsibility may be lost. So, Accounting has been advanced to make fit for solving this issue. Business with decentralisation system now use "Responsibility Accounting System".

Under this the managers will be made acountable for every decisions they make. Under this system every unit, each department will be modified into Responsibility Centres and be assigned respponsibility to the respective managers of those centers. These responsibilty centers may be a Profit Center, Cost Center or an Investment center.