Page 15 - Microsoft Word - 00 ACCA F2 Prelims.docx

Accounting for Management

Responsibility centres

Responsibility accounting is based on identifying individual parts of a business which
are the responsibility of a single manager.

A cost centre is a production or service location, function, activity or
item of equipment for which costs are accumulated. A cost centre could
be large or small.

A revenue centre is a responsibility centre that is devoted to raising
revenue (or generating sales) without any link to the associated costs.
Revenue centres might be encountered in the not-for-profit sector or in
the marketing operation of a commercial organisation.

If a manager is responsible for revenue as well as costs, the
responsibility centre is a profit centre, and the manager responsible is
held accountable for the profitability of the operations in his or her

charge.

If a manager is responsible for investment decisions as well as for
revenue and costs, the responsibility centre is an investment centre,
and the manager responsible is held accountable not only for profits,
but also for the return on investment from the operations in his or her
charge. There could be several profit centres within an investment
centre.

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