Which of the following are the benefits of responsibility accounting?
1. It facilitates the centralisation of decision taking.
2. It provides a system of closer control.
3. It measures the performance of individuals in an objective manner.
4. It develops a sense of cost consciousness among managers and their subordinates.
A. 1, 2 and 3
B. 2, 3 and 4
C. 1, 2 and 4
D. 1, 3 and 4
Answer: Option B
Solution (By Examveda Team)
Responsibility accounting is a system where different managers are made responsible for the performance of their own departments, especially in terms of costs and revenues.Statement 1 is incorrect because responsibility accounting encourages decentralisation of decision-making, where managers at different levels are given authority to take decisions for their own areas, rather than centralising all decisions at the top.
Statement 2 is correct as it provides a system of closer control, since each manager is accountable for their department’s performance, making monitoring more effective.
Statement 3 is correct because it enables objective measurement of individual performance by comparing actual results with predetermined targets or budgets.
Statement 4 is also correct as it develops a sense of cost consciousness among managers and their subordinates, encouraging efficient use of resources.
Therefore, the correct statements are 2, 3 and 4.
Hence, Option B is correct.
This Question Belongs to Commerce >> Accounting
The correct answer is:
**B. 2, 3 and 4**
### Explanation:
Responsibility accounting is a system where managers are held accountable for the performance of their respective responsibility centers.
Let’s evaluate each statement:
1. **Facilitates centralisation of decision taking ❌**
– Incorrect. Responsibility accounting actually promotes **decentralisation**, not centralisation.
2. **Provides a system of closer control ✅**
– Correct. It helps in monitoring and controlling performance at different levels.
3. **Measures performance of individuals objectively ✅**
– Correct. It evaluates managers based on controllable factors.
4. **Develops cost consciousness among managers and subordinates ✅**
– Correct. Since individuals are accountable, they become more cost-aware.
### Conclusion:
Only statements **2, 3, and 4 are correct**, hence **Option B**.