Introduction

The operations of businesses involve managers with different levels of responsibility and authority making decisions guiding the day to day operation. Accounting information plays an key role in enabling this decision making and accountability in managers. In this chapter, we explore how accounting information is used to measure performance outcomes, monitor managers and employees’ performance and motivate them to act in the best interest of the business.

Chapter outline

After reading this chapter, you should be able to:

1. Describe the structure and management of decentralised organisations and evaluate the benefits and drawbacks of decentralisation
2.  Evaluate how responsibility accounting is used to help manage a decentralised organisation
3. Define cost, revenue, profit and investment centres and explain why managers of each must be evaluated differently
4. Compute and interpret segment margin in an organisation
5. Compute, interpret and compare return on investment (ROI) and residual income
6. Describe the balanced scorecard and its key dimensions
7. Discuss the importance of using incentives to motivate managers