December 8, 2011

Responsibility Accounting for Management Control

Responsibility accounting creates reports showing performance of various responsibility centers vis a vis their budgets and plans.

A management control system is a logical interpretation of techniques to gather and use information to make planning and control decisions, to motivate employee behavior, and to evaluate performance.

Purposes of management system are:

1. To clearly communicate the organization's goals (communication)
2. To ensure that managers understand the specific actions required of their units to achieve organization's goals. (unit level goals)
3. To record and communicate the results of units and summarise them into aggregate results and then communicate them across the organization.
4. To ensure that actions at unit level and corporate level are adjusted to changes in the environment so as to achieve planned goals.

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