Responsibility Centre

Meaning Of Responsibility Centre

A responsibility centre is an operational unit or entity within an organisation, that is responsible for all the activities and tasks structured for that unit. These centres have their own goal, staffs, objectives, policies and procedures, and financial reports. And are used to balance responsibilities related to expenses incurred, revenue generated, and funds invested to an individual.

In a multinational or large corporation, the organisation tasks are divided into a subtask, and each task is given to various small division or groups. In this context, all groups in that organisation are responsibility centres.

Types of Responsibility Centre:

  • Cost Centre- A Cost Centre is a department or a unit which supervises, allocates, segregates, and eliminates all sorts of cost related to a company. The cost centre prime work is to check the cost of an organisation and to limit the unwanted expenditure the company may acquire. The cost can be the determination of both person and location. In multinational companies, the cost centre is authorised to decrease and manage the cost.
  • Revenue Centre- This centre is accountable for initiating and monitoring revenue. The management does not have any control over the cost or investment but can monitor a few of the expenses in the marketing section. The production of the revenue centre is calculated by analysing the budgeted revenue with actual revenue and actual marketing expenses with budgeted marketing expenses.
  • Profit Centre-It is a division or department of a company which operates for the calculation of profit. In an organisation, different profit centres are managed by the managers, who identifies profits on the basis of costs and incomes. Profit Centre is accountable for all the actions associated with the sales of goods and production.
  • Investment Centre- This centre is responsible for both investments and revenue. The investment manager can control expenses, income, the fund invested in assets, etc. He also has the authority to form a credit policy, which has an immediate impact on debt collection.

The above mentioned is the concept, that is elucidated in detail about ‘Responsibility Centre’ for the Commerce students. To know more, stay tuned to BYJU’S.