Chapter 4


Sec. 1. Scope.This Chapter covers the definition of terms, objectives, concepts, presentation of costs and revenue in the financial statements, and the responsibility center code structure.

Sec. 2. Definition of Terms.For the purpose of this Manual, the terms used in this chapter shall be construed to mean as follows:

a. Responsibility Accounting- provides access to cost and revenue information under the supervision of a manager having a direct responsibility for its performance. It is a system that measures the plans (by budgets) and actions (by actual results) of each responsibility center.

b. Responsibility Center- is a part, segment, unit or function of a government agency, headed by a manager, who is accountable for a specified set of activities. Except for some, which derive most of their income from collection of taxes and fees, NGAs are basically cost centers whichprimary purpose is to render service to the public at the lowest possible cost. Cost centers are established to provide each government agency'saccessibility to cost information and to facilitate cost monitoring at any given period.

Sec. 3. Objectives of Responsibility Accounting. Responsibility accounting aims to: a) ensure that all costs and revenues are properly charged/credited to the correct responsibility center so that deviations from the budget can be readily attributed to managers accountable therefor;b) provide a basis for making decisions for future operations; and c) facilitate review activities, monitoring the performance of each responsibility center and evaluation of the effectiveness of agency's operations.

Sec. 4. Concepts of Responsibility Accounting. The following are the concepts of responsibility accounting:

a. Responsibility accounting involves accumulating and reporting data on revenues and costs on the basis of the manager's action who has authority to make the day-to-day decisions about the items;

b. Evaluation of a manager's performance is based on the matters directly under his control;

c. Responsibility accounting can be used at every level of management in which the following conditions exist:

1. Cost and revenues can be directly associated with the specific level of management responsibility;

2. Costs and revenues are controllable at the level of responsibility with which they are associated; and

3. Budget data can be developed for evaluating the manager's effectiveness in controlling the costs and revenues.

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