Question

1. Explain the responsibility of the accounting department.

2. What is one advantage of having 2 costs pools (one for fixed costs and one for variable costs) for each service department?

Answer 1

Answer 1:

The accounting department is responsible for recording and reporting all the accounting transactions in an organization. The department is basically entrusted to record all the cash flows in the organizations and other non-cash flow transactions that have accounting impact. These activities generally include accounts receivables, accounts payable, sales, purchase, debt, expenses etc. They are responsible for disbursing the various payments to be made including the salary. The accounting department does the verification of the cash flows that are made in the company. They are entrusted to keep the operations running in the business as far as financial aspects are considered. They are responsible for managing and maintaining various bank accounts of the organization. They are the ones responsible for billing of the invoices, for making payments against the purchases and collecting the debt against the sales made.

They are also responsible for reporting the transactions in the financial statements of the organization. They have to ensure that all the finances are secured and there is no cash embezzlement or any fraud in the organization.

Answer 2:

The one advantage of having two cost pools for each service department is that it allows the costs to be allocated more directly on the basis of the cost drivers. By segregating the costs into fixed and variable, the organization can determine the accurate cost incurred for each level of output. It is easily identifiable that the costs are fixed or variable. This will help in doing cost analysis and to take decisions on the basis of the cost effectiveness and cost efficiency.