Abstract
Today’s businesses are more competitive than ever before, and they must constantly adapt to changing market conditions and altering business environments. If the responsibility or subunits departments where an individual accountants is held personally responsible for their operations are unable to work together effectivel can result in failure to achieve organizations financial goals and objectives. Effective operations throughout an organization, and can be easily controlled by allocating responsibilities and also power with regard to the structure and size of the firm, is critical to the achievement of organizational goals. It is possible to reduce costs and increase profits by using responsibility accounting while preparing tax returns or financial statements, but it is also possible to use responsibility accounting to aid in the analysis of performance. It is possible to eliminate ethical issues from company operations at all levels with the proper implementation of responsibility accounting. In this study, I will look at how the legal obligations of accountants in taxation and financial reporting within an organization. Impacts of responsibility accounting on business organizations relating to mistakes of taxes and financial statements are studied using a descriptive approach based on a wide range of literature.
Introduction
Delegation of power and responsibility is at the heart of responsibility accounting system in every organization. Accountancy of the responsibility department is given power and duty. The system regarding responsibility legal system of accountant is based on responsibility groups (i.e., revenue department, investment department, profit department and cost c department). The Investment department are run by a team of accountants who are in charge of overseeing all aspects of income, tax obligations, expenses, and capital expenditures.
The revenue department accountant is in charge of a company’s operational revenue. There is no control over revenue or operational asset investment in the cost department accountant’s hands (Shahidehpour, 2021). However, the profit department accountant does not influence operational asset investment. To assess the effectiveness of each responsibility department’s accountants and to provide a responsibility report and an information report for upper management review, responsibility accounting was created to that end (Kilian & Hennigs, 2014). Each responsibility department’s results are measured in this way, allowing each accountant to be aware of his or her responsibilities in terms of cost, revenue, taxes and profit, and budgetary management. Effective in cost control, management control, and profit planning is the key legal responsibility of every accountant in an organization. Consequently, like an accounting system, it divided costs between those that could be controlled and those that could not be controlled (DESYATNYK & SHAPOVALOV, 2020).
Only the financial costs that can be controlled are considered in this method. Controlling expenses and errors regarding taxes or financial statements are a part of the responsibility legal system of control. As a performance evaluation tool, it may also be used to divide the organizational accounting structure into distinct responsibility areas. Accountability accounting which is based on the notion of establishing decentralization (segmentation of organizations into subunits and delegation of decision-making power), motivating employees and evaluating performance Guterresa et al., (2020). One of the finest instruments for accounting cost evaluation and management in the event of decentralization or divisionalization is responsibility legal accounting, which makes managing a huge business or organization much easier.
Responsibility Accounting Relation to Taxes or Financial Statements
Responsibility accounting, on the other hand, which entails the division of an organization into smaller, more manageable parts, each with its own set of accounting tasks. Departments, divisions, branches, segments, and product lines are examples of these units. There are a variety of roles and responsibilities assigned to each department’s accountants. Responsibility legal accounting is a method in which accountants are held accountable for financial errors or mistakes , and their actual performance may be measured and evaluated (Lennon, 2019). Other names for this kind of accounting include “activity” and “profitability”.
activity accounting or Accountability accounting, is the collecting as well as reporting of financial information regarding different financial decision departments, taxes, and financial statements in an organization. Accountants should only be held accountable for the things they can truly manage to a substantial amount, and this is the primary premise behind responsibility legal accounting.
Literature Review
To instill motivation in employees, behavioral science and organizational theory (Engl, 2018) are used in conjunction with an examination of financial accounting systems and organizations tax reports. Researchers found that employee motivation has greater influence on decentralization while creating an effective financial structure of an organization that fosters accountability and responsibility. Using adequate budgets, tax filing returns, and standards, responsibility legal accounting imposes an effective financial control over the decentralization process, implying favorable elements of direct usage of accounting reports, which flourishes decentralization and is crucial for employees motivation.
Analysis of the issue related to the accountant’s financial performance assessment and tax remuneration based on prior non-controllable capacity organization’s costs is the primary focus of the research. An accountant’s financial performance and compensation are based on historical costs over which the accountant had no direct influence when assigning fixed costs for compensation purposes and tax obligations, with assumptions, circumstances, and cash flows used to derive depreciation.
According to the Principle-Agent Model (Azar & Micali, 2018), cause-effect connection of financial controllability illustrates a significant correlation between financial information resources41 and the idea of financial control (Azar & Micali, 2018). Controllability is an acceptable issue when it comes to financial information’s topic matter. An investigation into the Resource Management Systems (RMS) in NHS hospitals in Britain that aids in development of management information systems, entails a systems that helps to disclose the financial cost of medical activity by taking into consideration the aspect of responsibility legal accounting and the important key function of accounting legal system, but the success was limited in disclosing such systems. A three-year actor-network approach to data collection from three health authorities reveals a high degree of accountant’ consistency in the implementation of financial management systems’ nature and purpose.
Recent research by Wang et al., (2019) revealed that despite several efforts to install National Health Service responsibility accounting systems in the United Kingdom, the vast majority of these programs failed to achieve the anticipated results. Market changes in UK healthcare organizations had never been achievable with the coordination of regulating the environment and central government for making responsibility legal accounting actionable.
The reciprocation between various types of financial control problems and provided clear information on responsibility accounting, which can be examined in either team or individual production, which states that although the accountants conditionally control the organization’s production, the individuals are not held accountable for department’s performance measure under certain conditions, and also an owner intervention, where accountants are held accountable for the performance of their departments.
There is an issue known as the “ratchet effect” that has an impact on the dynamic principal-agent interaction (Geeraert & Drieskens, 2020). In this research, two-period agency models demonstrate that employing aggregate performance measurements and a larger grouping of responsibilities aid to reduce the ratchet effect. As a result of their work, they have drawn up agency diagrams that illustrate the many ways in which various financial dynamic environments may be aggregated or de-aggregated, as well as the various options for distributing responsibility within accounting environment.
It was found that a management accounting application entails various management accounting techniques for cost control system, a case of Han Dan Iron and Steel Company in the People’s Republic of China, such as target costing, responsibility accounting, and flexible budgeting as well as standard costing, behavior motivation, internal transfer pricing and performance evaluation. The primary goal of this investigation was to lower manufacturing costs while simultaneously increasing profit margins. Using the financial responsibility cost control method proved to be successful in the trial. Management accounting may have a good impact on the company and profitability in China and other emerging nations, as evidenced by the Han Dan example. Accountants at several responsibility departments (RCs) were studied over a time period of nine years to examine the effectiveness of responsibility accounting (RA) in commanding horizontal accounting relations. They found that RA depends on the magnitude, scope, and speed of changing organizational processes and showed several accounting and participation practices to influence competitive behavior among RC accountants. According to this research, RC boundary control is supported by several participation practices and financial reporting to influence the behavior of RC accountants competitively or cooperatively. It also showed that responsibility department boundaries can be managed to make visible and valid assumptions by finding the expression of “responsibility accounting” in the system along these boundaries (Jiang, 2019). According to findings of this study, there is a connection between the concepts of accountability and controllability. As a result, the job of accountants would have a greater sense of purpose if they were held accountable for tasks that they could influence. They value accountability as highly as controllability, and they see both as equally important. A clear link between accountability and control may be seen in the structure of accounting’s responsibilities in relation to financial statements and taxes.
The research also found that major corporations utilize responsibility accounting as an effective control mechanism and a tool for performance assessment. Standard costing and budgeting are two components of the Process of Responsibility accounting. Responsibility accounting is based on the size of the company. Responsibility accounting is more beneficial to large organizations than too small businesses since each departmental accountant is held accountable for his or her division’s financial results. Decentralized performance evaluation in the hospitality industry, where big, diverse enterprises may be broken down into smaller, more manageable units termed “responsibility departments.” Accounting for responsibility provides management with crucial data on relevant costs and performance in each operational unit, which is essential for the service industry’s survival. Investment (the middle element) was established to highlight how planning, actions, successes, and performance assessment may be conceptualized as a way to construct the authority controllability, responsibility, and involvement and motivation of the hotel management staff.
As the business grows throughout the globe, businesses need to adapt to new technology and tactics to achieve their goals. Centrifugal administration, in which decision-making power is transferred from higher administration units to lower administration units, has become more important in today’s businesses. Accountability accounting issues and the impact of transfer pricing policy on the economy of Nigeria, a research by Lawal et al., (2016), which included a detailed analysis of transfer pricing issues, found that multinational firms engaged in several activities (handling, planning, and controlling) in order to reduce the burden of corporate tax.
A study conducted by Islam & Hossain, (2017) looked at how Bangladeshi textile companies listed on the Bangladesh Stock Exchange used the responsibility accounting system, focusing on satisfaction with the overall system and the importance of each element in terms of identifying and assigning responsibility, establishing performance metrics, assessing performance, and determining responsibility accounting system rewards. It was determined that all of the factors were important, and the degree of satisfaction with adopting responsibility accounting was satisfactory.
Accountants, according to Islam & Hossain, (2017), described responsibility accounting as the process of gathering, summarizing, and reporting financial information regarding numerous decision departments within an organization. They conducted a survey on Bangladesh’s listed garments in order to determine the overall satisfaction with the system of responsibility accounting and the significance of each element of the system. They discovered that all elements are significant and that all Bangladesh’s listed garments companies have a satisfactory level of using the system of responsibility accounting.
Ganguly et al., (2019) stated that a large organization’s structure determines whether it should be centralized or decentralized along with defining responsibility accounting system, which is necessary for terms of delegating responsibilities for planning and controlling the business activities to the accountants. Additionally, the research stated when comparing the standard data for each responsibility department to actual data, the organization’s performance result can be either favorable or unfavorable, depending on how much actual data is greater than standard data on financial statements. Also, responsibility accounting is an administrative accounting method dealing with costs and revenues and used to measure the results of all responsibility departments where the performance of accountants is evaluated based on the things they control.
Findings of the study
Reliability accounting is a method that uses the notion of decentralization to identify a link between actions and results so that diverse sectors of an organization may be motivated to improve their performance. The degree to which an organization may decentralize depends on the size of the organization (activity-based, functional-based, and strategic-based). In this way, cost management may be achieved by coordinating the many operational segments, where information content and the idea of control are important in imposing controllability with accepting responsibility and accountability.
Conclusion And Guideline for Future Research
Many theoretical and empirical studies on responsibility accounting have accumulated concepts of controllability, responsibility, and accountability principles, which are evaluated as guiding criteria for large organizations to adopt and implement to achieve organizational objectives effectively and efficiently. Absolute and relative control are two kinds of control mechanisms. Absolute control (the inability to control anything) is uncommon, even though RA deals with it. As a result, the RA system’s cost department can only be used to manage relative costs. A “Lamp of Aladdin” is a tool used to assess segmental performance using ROI, RI, EVA, and BSC. In our nation, it is not a new idea. Manufacturing businesses including the textile and garment industry and service firms in Bangladesh have already used this strategy. This research provides some important data, but it does so with significant caveats. The main sources of data are not generalized in this research, which relies only on secondary sources (written papers, books, and websites). It may be possible to conduct a longer-term analysis of Bangladesh’s industrial and service industries. All companies, including those in Bangladesh, should implement this approach to enhance controllability, responsibility, and accountability, as well as to assess performance. As a result, responsibility accounting aids in both planning and decision-making.
References
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