Advantages of Responsibility Accounting

1.    Better Business Understanding

First advantage of responsibility accounting is better business understating. Responsibility accounting is very helpful in developing the better understanding of the business. The management is in position to identify the performing and non performing area of the business.

2.    Cost Control

Second advantage of responsibility accounting is cost control. The system creates a built in control of cost as department supervisor is responsible for explaining the high cost consumed by his department. The cost if being compared with other departments so manager takes the responsibility to control the cost and this approach goes down to employees as well.

3.    Fraud & Error Identification

Third advantage of responsibility accounting is fraud and error identification. This system identifies the fraud and errors on timely bases. The business world has experience that if leakages are not identified in time. The ultimate result is the disaster. The Responsibility accounting is really helpful to identify unusual trend of expenditure.

4.    Critical Area Identification

Fourth advantage of responsibility is critical or key arrears identification. This system provides the vital information about the critical areas of the organization. The management can pay special attention to those areas which will result in better result.

5.    Comparison is possible

Fifth advantage of responsibility accounting is comparison of performance. This system really helps to compare the performance of the managers and the non performing manager can be identified easily.

6.     Performance and Efficiency Improvement

Sixth advantage of responsibly account is improvement of performance and efficiency .This system put some pressure on the manager to improve efficiency as the efficiency is being monitored regularly. Thus it improves efficiency of the manager and ultimately also has positive impact on the efficiency of the employees.