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

Solution. 1.When an organization decides to do business in competitive economic market, it sets general objective of meeting profit target along with social impact in society. To record and analyze financial activities and transactions along with movement of cash flows of an organization, accounting department is set up. There are many sub-head people and department under the accounting department, working under state and federal laws.

Firstly, accounting department needs to record, interpret and report all financial statements of an organization to the management, stockholders and customers to build trust and facilitate decision making process for organization to sustain. Accounting department needs to prepare and manage all payroll details and timely repayment of bills. It needs to prepare budgets for short term and long term according to the needs of the organization and comparing profit margin and any changes in environments needs immediate reporting. It control and regulates activities of sub-heads to ignore any manipulative and fraudulent activities by internal controlling. It works after informing the organization of investment, capital requirements and tax procedures and preparations for the organization. So, we can conclude, it plays an active role in administering an organization.

2.Recognizing and managing two cost pools each one for fixed costs and other for variable costs for each service department, helps and facilitates an organization in determining total cost amount distribution and helps determine profit from such investment. It help recognize an organization profit margins on varying level of production. Such recognition of information, help achieve an organization, economies of scale.