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Why is defining cost center & profit center important properly?

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Question added by Nazmul Islam CMA , Manager , Robi Axiatal Ltd.
Date Posted: 2016/12/10
Wilfredo Quito
by Wilfredo Quito , Accounting Manager , DDC LAND INC.

 

An activity center or responsibility center is the unit of business organization which is accounted for a specific task or activity. Cost Center and Profit Center are the two major types of the activity centers. A center for which cost is ascertained is known as Cost Center, whereas a center whose performance measurement can be done only through its income earning capacity is known as Profit Center.

 

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