What defines a responsibility center?

A responsibility center is defined as a segment of an organization that is managed by an accountable manager who is responsible for its financial outcomes and operational performance. This structure allows for clear lines of accountability and performance evaluation across different parts of an organization. By having an accountable manager, the organization can effectively monitor decision-making, manage resources, and assess the efficiency of the center in contributing to the overall goals of the company.

This accountable manager typically has the authority to make decisions related to costs, revenues, and operational efficiency, which aligns well with the establishment of responsibility centers in management accounting. These centers can take various forms, such as cost centers, profit centers, or investment centers, each with its own specific performance metrics that can be evaluated based on the decisions made by the manager in charge.