What is a Responsibility Accounting Budget?

//What is a Responsibility Accounting Budget?
What is a Responsibility Accounting Budget? 2017-10-10T04:07:00+00:00

Definition: A responsibility accounting budget is a report designed to track the controllable costs and revenues of a manager as well as chart their efficiency and effectiveness. In other words, a responsibility budget is a budget that companies make for the expenses and revenues that are controlled by a specific manager. Since not all costs can controlled by managers, it makes sense to make a budget specifically charting the expenses that managers can control.

What Does Responsibility Accounting Budget Mean?

Many noncontrollable costs or uncontrollable costs like insurance premiums or fixed asset purchases are out of a department manager’s control and authority. Executives and people higher in the company decide financial decisions like these. Management is generally not held responsible for these types of expenses.

Example

The responsibility accounting budget is generally prepared by officers or upper level management to track the responsibilities of each department manager. Upper level management can use these responsibility budgets to track performance of managers as well as track goals for the future.

The responsibility accounting budget is only one piece of the responsibility accounting performance report or RAPR where executives and upper level management track efficiency and profitability by department and person. The RAPR is also used to help explain changes in cost structure and profitability.

For instance, if the manufacturing department just invested in new robotic assembly line equipment, the RAPR should show a decrease in the variable costs per product produced. Likewise, over labor hours and labor costs should be lower for this department as well.