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ACCA Applied Knowledge · Management Accounting · Budgetary control and reporting

Which one of the following is a feature of a budget report designed on the principle of responsibility accounting?

A responsibility accounting report shows only the costs and revenues a manager can control or significantly influence. Including allocated uncontrollable costs would make the manager answerable for things they cannot affect, weakening control and motivation.

  1. AIt shows only controllable costs and revenues for the manager being assessedCorrect
  2. BIt allocates all head-office costs to each manager to give a full cost picture
  3. CIt compares actual results with the prior year only
  4. DIt is prepared only for the board of directors

Explanation

Responsibility accounting holds managers accountable only for items they can influence. Allocating uncontrollable head-office costs would blur accountability and demotivate managers, so that option is wrong. Comparison should be with a budget, not just last year.

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