Final answer:
A system that establishes financial accountability for operating segments is called responsibility accounting. It involves assessing each segment's performance based on financial targets, aligning managers' objectives with company goals.
Step-by-step explanation:
A system that establishes financial accountability for operating segments within an organization is called responsibility accounting. This is a system that measures the results of each responsibility center and compares them with some measure of expected or budgeted outcome. The purpose is to assess the performance of different areas of a company that have their own responsibilities.
In responsibility accounting, the organization is divided into various 'centers' or segments, each with its own performance measures. There are several types of centers: a cost center is responsible only for costs, a profit center is responsible for both revenue and costs (hence, profits), and an investment center is responsible for generating returns on the assets it controls, in addition to cost and revenue.
To achieve the financial accountability, managers of these centers are measured and assessed based on their performance against set financial targets. This approach aligns manager’s objectives with company goals and enables better decision-making at each segment level.