Memo
To: Jeff Smart, Chief Operating Officer of Mitchell
From: Yuxi Zhang, Accountant
Subject: Responsibility Accounting Method in Corporation Operation
Date: September 20, 2015

This memo is in response to your questions concerning the responsibility accounting method. The memo will first explain responsibility accounting and then discuss how to correctly applying it in operation. Finally, some precautions of system installed are provided too you. After you understanding responsibility accounting method, you will be better able to decide whether you want to install for the company.

What Is Responsibility Accounting?

Based on Managerial Cost Accounting Implementation Guide, the definition of responsibility accounting is:

“Collection, summarization, and reporting of financial information about various decision centers (responsibility centers) throughout an organization; also called activity accounting or profitability accounting. It traces costs, revenues, or profits to the individual managers primarily responsible for making decisions about the costs, revenues, or profits in question and taking appropriate actions. Responsibility accounting is appropriate where top management has delegated authority to make decisions. The idea being that each manager’s performance should be judged by how well he or she manages those items under his or her control.”

The responsibility accounting system is based on the idea that proper management should take place as closely to the departments as possible. The officer and executive level should not be in charge of the day-to-day operations of the individual departments. This would be inefficient and not cost effective because the executives don’t have first hand experience dealing with the problems of each department.

How To Apply Responsibility Accounting?

To implement a responsibility accounting system, the