What is the responsibility center?
Liability Center is a unit of management within the organization. As an important part of accounting based on responsibility, the center helps to divide a large organization as corporate or franchise business into easily analyzed segments. Liability centers can have different functions and are usually classified as cost centers, profitable centers or investment centers.
Every center of responsibility is in the care of a manager or a small control team. This helps to place accounting duties in the hands of a trusted worker to ensure precise reports. The level of liability of each unit may vary according to place in business; In the jewelry chain, it can be a unit of the lowest level by a production plant or a craft workplace, a unit of medium responsibility can be an individual trade and the highest level can be the CEO or CFO of the company. By distributing an organization into a management unit of management, it may be easier to identifyAt financial strengths and weaknesses throughout the business.
The cost centers are usually the most basic unit of accounting of liability. These are units in which the function is to incur costs for promoting or helping business in some way. In the production plant, the Front Office may be considered a cost center because it does not directly produce profits. Depending on the specific accounting structure of the organization, any area that causes costs without access to profits is considered a cost center.
profit centers usually have the characteristics of cargo centers, but they also have to generate profit. In the clothing company, the shop window causes costs through salaries paid to workers through rent, public services and furniture. However, the basic function of the interpretation is to create a profit by selling goods or services. Making an account report from the Liability Center established nAnd profit is generally more complicated than from a cost center, because the report must consider the share of costs compared to the company's objectives.
The third type of liability center is an investment unit. This is usually solved by upper level management and is somewhat different from the previous two categories. Instead of being afraid of direct production or operating costs and direct profits, the investment center must relate to the total investment revenues in its operation. This may include the company's investment capital in shares and other businesses, but the investment center may also be charged with creating a business expansion strategies that do not endanger the profit range. Every time the franchise opens a new location, it may be necessary to justify the cost of a new location based on the probability or prediction of a reliable return.