Accounting

The First Step In A Responsibility Reporting System

The pyramid structure or the Responsibility Reporting system for responsibility accounting. The first system is employed in a manufacturing concern while the second system is employed in a bank.

The first step in a responsibility reporting system is the establishment of lines of responsibility and responsibility areas. Each block in a company’s organization chart represents a segment (cost center, division, department, etc.) that is reported upon and that receives reports on the functions responsible to it. Any report prepared according to this concept easily fits into one of these blocks as is illustrated in the organization chart below.Responsibility reporting system

Expenses for the departments for which the Production Superintendent is held accountable for. Report B provides the Vice-President of Manufacturing with performance figures for the five responsibility areas within his division. Finally, the President receives a summary, Report A, indicating overhead expenses not only for his area but also for the three divisions (Marketing, Manufacturing, Finance) reporting to him.

Responsibility reporting in a bank utilizing a responsibility reporting system that permits effective expense control by accurately identifying and reporting expenses along the bank’s organizational lines for enabling proper assignment of responsibility and control at each management level. Expenses at each management level are identified by area responsibility as well as by natural classification.

A typical Responsibility report for an intermediate (middle) level of management while shows a report of a cost center. To provide all levels of management with all the facts when needed, the Responsibility reporting system should be kept geared to the requirements of all managerial personnel. Each report should be so arranged that exceptions are highlighted and brought to the attention of theĀ  responsible supervisor without too much searching and reading through many pages.

The number of reports issued and sent to a manager also needs constant examination. Too many times a Responsibility reporting system is cluttered with old, detailed, and voluminous reports; and no one has ever considered the cost of their preparation or their justification. No reporting system is ever perfect. It requires continuous checking and examination in the light of changing times and the vicissitudes of business itself.

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