Prerequisites of responsibility accounting: Personal Factors in Responsibility Accounting says a program to develop for management accounting controls which must be considered as a prime responsibility of top management with the accounting department in providing the technical assistance. To assure the follow-through and therewith the ultimate success of the program, management must provide a complete clarification of the objectives and responsibilities of all levels of the organization.
This prerequisites of responsibility accounting requires an understanding by middle and operating management of executive management’s goals. The acceptance of responsibility for certain costs and expenses does not always follow the mere issuance of directives and orders. Supervisory personnel, particularly at the foreman level need guidance and training to achieve the control and /or profit results expected from them.
Under personal factors in Responsibility Accounting – Control responsibility requires a certain fundamental attitude or frame of mind for the task. It just does not happen naturally. One of the most beneficial influences is executive management’s own exemplary adherence to the cost-and-profit responsibility it created. For effective result, Prerequisites of Responsibility Accounting should be available before the system is implemented.
Equal importance in the motivation for corrective action by the responsible individual to be present as prerequisites of responsibility accounting. The issuance of reports based on the organization’s responsibility concept is not sufficient. The successful achievement of effective management control depends upon the lines of communication between the accounting department, the responsible supervisors and their superiors.
Responsibility accounting requires teamwork in the truest sense of the word. Personal Factors in Responsibility Accounting must be considered more carefully to get the good result out of it.
- Organizational structure should be divided into smaller units called the Responsibility Centers.
- Objectives of each of the responsibility centers should be predetermined.
- Right and responsibilities of each and every responsibility center should be well-defined.
- Responsibility center be supposed to be competent to supply accounting information as and when required.