Management Accounting And Presentation

Management
Accounting

INTRODUCTION
Management accounting is used to deals with presentation and accountancy data for the
purpose of maintaining the proper records of accounts and profits. It is used by all business
industries to execute the business action in effective manner. In addition, managerial accounting
is the systematic process of determination, accumulation, measuring, interpretation, readying and
communication of financial information which is used by management to make plan for
organising and controlling the organisation (Chan, and Hsu, 2016). The main purpose of this
report is to know how it is used within organisation and helps to remove the financial issues. For
knowing the value of management accounting Bentley motors Ltd is selected that is British
engineering company. It was founded in 1919 by H.M. Bentley in London. The present project
discusses about management accounting system and its essential requirement within industry,
different methods which is used for accounting reporting and planning tools that can be utilized
in budgetary control. Additionally, report discuss about costing techniques in order to prepare the
income statement and how it helps to solve the financial problems.
ACTIVITY 1
PART A
Essential requirement of different systems of management accounting
Management accounting: A procedure in which business entities try to pull off,
supervise and analyse its functional and operational procedures in a proper manner is known as
management accounting. For all the companies it is very important to conduct it every year so
that it can be assessed that the organisation is performing appropriately. Managers in Bentley
use it for the purpose of formulating strategic decisions for betterment of the company. For the
purpose of forming various strategies various systems are used by management of the entity (Hsu
and Lin, 2016).
Management accounting systems: All the systems which are used by managers to
analyse and observe timely statistical information of company in order to form decisions for
regular operational processes. Management in Bentley Ltd use various kinds of system to keep
detailed information regarding actual status and executional efficiency of the organisation. All
such system guides management to keep detailed and well structured records so that it can be
used in future for betterment of enterprise. Detailed analysis of them is conducted below:
1

Cost accounting system: The system which is mainly used by managers to estimate
expenses which are related to various items or cars which are produced by the entity is known as
cost accounting system. It guides them to keep an estimation of accurate costs that have faced in
the process of executing business operations and performing production activities. In Bentley
Motors, managers use it to analyse the cost which is related to each and every car engineered by
the organisation. This system is needed for the company as it helps management to determine
actual costs of production (Charifzadeh and Taschner, 2017).
Inventory management system: This type of system is principally used for production
activities by those organisations which are manufacturing different products for the purpose of
keeping detailed information of goods which are used for production activities. It helps
managers analyse that there is stock in their warehouses or not. Managers of Bentley, are using it
to assess that company is able to meet the production expectations of clients with sufficient stock
for vehicles. It is required for business enterprise as it helps to monitor that actual status of stock.
It has various types and companies used them according to their requirements. All of them are as
follows:
AVCO (Average Cost Method): The companies which are using it use the goods on
average basis for the operational activities.
FIFO (First In First Out): This inventory manage is used by such organisations which are
using earlier received goods for production related procedures. It is used by managers of
the company to manage the inventory appropriately as it will helps to use all the
resources properly.
LIFO (Last In First Out): In this method currently purchased goods are utilised for the
engineering procedures of vehicles.
In Bentley Motors Limited FIFO method is used by managers in order to manufacture
different ranges of vehicles because this system can help in holding up productivity of all the
cars which are engineered by the company.
Price optimisation system: It is used by management of business entities to set right
rates for the products to meet expectations of clients. It can help the of the organisations attempt
to make the products pocket friendly for their target market. Managers in Bentley are currently
using it to analyse responses of clients on various prices which are set by it for the cars. It is very
important for the company as it helps management to decide the appropriate rates for all the cars
2

which can help to fulfil requirements of customers and meet organisational objectives such as
profit maximisation. For this purpose, companies choose best pricing strategy so that success can
be acquired by the business (Dai and et. al., 2017).
Job order costing system: It can be defined as a method which is implement by small
as well as large companies for the purpose of analysing and assigning costs to various operations
according to their nature. In Bentley Motors Limited managers are using to assess expenses of all
the processes which were conducted on the basis of specification of customers. It is very
important for the company to use it as it helps to determine actual costs of every job which is
performed by organisation. This system is mainly used by those enterprises which are conducting
their business activities according to specific customer orders.
All the above described system are used by managers of Bentley Motors Limited for the
purpose of analysing performance of the organisation and formulate strategies decision for
betterment of it.
Methods which are used for reporting of management accounting
Management accounting reporting: It can be defined as the procedures which is
followed by managers to create different reports which are having information of management
accounting. For managers it is vital to use appropriate methods for it so that accurate records
could be generated and detailed information regarding internal status of organisation can be
analysed. Management in Bentley Limited conducting this procedure every year so that it can be
determined that all the plans which were formed for future are appropriate or not and resulting
positively or not. Managers in Bentley Limited are using different kinds of it to formulate
various reports. All of them are discussed underneath
Budget report: It is a type of insider document which is utilised by management for the
purpose of comparison of actual and standard plans. One of the main use of it is to analyse that
all the funds which are used in operational activities are utilised properly or not. Managers in
Bentley Motors Limited generate it to measure that financial execution of business is good or
not. In every accounting year, a new budget report is created to compare that company is close to
its financial targets or not. Different activities such as production, sales, marketing etc. are
recorded in it and information of all of them is used to allot monetary resources to all the
operational divisions on the basis of their estimation of future expenses. It is advantageous for
3

Bentley Motors Limited as it helps managers to assess business performance of company (Qian
and Schaltegger, 2017).
Performance report: This type of report is created by business entities to document
accurate and appropriate information of performance of organisation as well as employees. It is
used by most of the companies to offer incentives and bonus to work force on the basis of their
efforts which are showed by them to attain organisational objectives. In Bentley Motors Limited,
it is generated by managers to observe that the activities which are performed by them are
resulting positively or negatively. It is advantageous for business entities such as Bentley
because it can guide through out the way in which employees could be motivated because they
get reward for their good performed with the help of it.
Inventory management report: In order to keep detailed record of goods which are
utilised by organisations to making sure that the stock which is used for business operations is
managed properly or not. It helps to analyse that the company is able to keep appropriate amount
of inventory so that the processes for engineering of cars could be performed in systematic
manner. having sufficient stock to conduct its operations or not. Managers in Bentley Motors
Limited formulate this report for the purpose of keeping detailed information regarding inventory
which is used to produce different models of cars. It is beneficial for the organisation because
with the help of it management can order stock before the warehouse goes out of stock. If a
company is not able to record accurate data in it then it will become difficult for it to execute
operational activities in appropriate manner (Dayanandan and et. al., 2016).
Accounting receivable report: A report which is generated by managers for the purpose
of keeping record of all the credit sales which are made in a specific time period is known as
account receivable report. Enterprises who are allowing credit to buyers create such types of
report. It helps to list all the unused credit memos and unpaid customer invoices according to due
date. In Bentley Motors Limited it is created by managers in order to analyse the amount which
is owed by clients. Main purpose of making this report is to record information of those
patronages who are not able to pay whole amount and promise to pay remaining after a certain
period of time. It is beneficial for the organisation because with the help of it management can
determine actual outstanding amount of different clients. Managers can tighten credit policies of
organisation by analysing account receivable report because it helps them to assess that buyers
4

are able to pay the owed amount on time or not. Moreover, the manager of Bentley can keep
records of unpaid customer with the help of this report.
All the above described management accounting reports are generated by managers of
Bentley Motors Limited in order to keep detailed information of the organisation which is used
by them to take future decisions. All these reports are also used to show stakeholders so that they
can analyse actual status of company and their interest in business can be maintained. Internal
stakeholders such as managers and employees to monitor actual status and performance of the
company for a specific time period.
Benefits and application of management accounting systems
Several accounting system Goodness
Price optimisation Primary advantages of such system is to set the prices of
production and services that help to maintain the profitability.
With the help of this system managers can analysis the
perception of customers.
Bentley motors Ltd utilize such system to fix the prices of
products and influence customers.
Job order costing system It is related with assigning the work among employees that help
to increase the productiveness and profits.
Through such system manager of Bentley motors Ltd can divide
the specific role of employees by analysing the cost of various
activities.
Inventory management It is beneficial for all manufacturing organisation to keep the
proper records of inventory and place order accordingly.
It helps to maintain the inventory within organisation that leads
to gain more profitability.
Moreover, Bentley motors Ltd reduces the wastages by using
this system and increase the production.
Cost accounting This is advantageous as it offers proper records and management
of costs.
It helps Bentley motors Ltd, to define the cost and control
5

excessive production.
Moreover, manager of Bentley motors Ltd can calculate direct
and indirect cost.
Assessment of accounting report and system
Reports and system are integrated within enterprise process which is evaluated by
managers by knowing the performance. It assist to keep the records of all transaction which is
done by Bentley motors Ltd. The organisation firstly uses management accounting system then
prepares accounting reports with the help of system that is used in organisational processes.
Without system accountant cannot prepare the management report and cannot make effective
business decision. The system such as cost accounting, inventory management, job order costing
and price optimisation system are integrated with different report such as inventory report,
account receivable and performance helps Bentley motors Ltd to manage different types of
activities with the help of system and report helps to give detailed information about business
activities. Moreover, it helps to defines how organisation can achieve goals and objective by
using effective management system and reports.
Cost calculation with the help of appropriate techniques
Cost: It involves price which is acquired by a individual to produce, accomplish and
merchandising something. This is the monetary valuation of resources, material, time, efforts and
opportunity in production and delivery of goods and services. A person who buys something and
paid consideration is known as cost.
Marginal costing: Such costing method involves fixed and variable cost. By this
technique fixed cost for period is considered as written off completely against the contribution
and variable cost is charged to the cost of units. In this technique, single variable cost assumes as
product cost and provides profits.
Absorption costing: It is considered as costing technique that states both variable and
fixed cost will regard as product costs. Its primary purpose is to give the report and calculate
accurate profit within organisation. It is the accumulation of direct labour, material, variable and
fixed cost in order to set the final cost of products and services.
PRACTICAL
6

7

Interpretation: According to above calculation it can be understand that organisation
can calculate profit from absorption and marginal costing method. Such as by using marginal
costing method profit is 150750 GPB and by using absorption costing method organisation is
getting 157550 GPB as profit.
8

(a) Labour hour: This means working hours of labour in which period they work. This is relates
with labour who works in an organisation and get earning according to hour. Workers works
within organisation by deciding the time and rate period that help to increase the productivity.
9

10

ACTIVITY 2
PART A
Different types of planning tools and their merits and demerits
Budget – It is a written document or estimation of cost which represent financial plan
within business organisation. It is important for companies to prepare the budget in order to
achieve the goals. In other words, budget is the roughly structure of income and expenditure
which is needed to set the goals and make plans accordingly. It helps company to analysis the
needs and arrange the funds in order to accomplish targets. For instance, the management of
Bentley motors Ltd decide the goals and get ready the budget that helps to reach nearby goals
(Halaoua, Hamdi and Mejri, 2017).
Budgetary control: This is the systematized process for managers to decide presentation
and financial goals with estimation and do compare with actual expenses for making profits. In
other words, it means to how well managers or accountant uses budgets in order to monitor and
control operation and cost of business industry in an accounting period. In context to Bentley
motors Ltd, managers set the goals and budget and compares with actual budget that help to
control the business performance. Moreover, it helps to increase the productivity and profitability
by focusing on estimated budget and actual budgets. It involves different types of tools which
helps to control the budget. The description of planning tools is given as:
Operating budget: This is the financial plan which is designed by managers to meet
with organisation's debt obligation and helps to maintain growth over a certain period of time.
This budget is mainly used to know how industry spends money and what is next requirement of
money within entity in order to accomplish objectives. In Bentley motors Ltd, managers prepare
operating budget that help to maintain the records of money by focusing on operating functions.
Moreover, it is used to analysis the demand of organisation and make plans accordingly.
 Advantages: Operating budget helps Bentley motors Ltd to allocate the money in short
term as well as for future period. It helps to provide business with more financial freedom
that creates new opportunities for companies. With the help of this budget performance of
respective company can be increased as it show how much there is need to make
investment and when that helps to make profits accordingly. This budget helps to perform
day to day business activities which are running by organisation in effective manner.
11

 Disadvantages: It is time consuming budget because it considers lots of financial
information. Moreover, it does not show accurate financial plan, as result low
productivity and profitability. It does not provide accurate information that may be
challenge for business entity and affects negatively performance.
Capital budget: This means a planning process that can be utilized to define institution's
long term investment like new plant and machinery, products, new research development
projects and replace of machinery for increasing the earnings. Moreover, it is the process of
allocating resources for investment, expenditure and capital. It is used to set the long term plans
and creates the value of business entity to the shareholders. In Bentley motors Ltd, managers set
the long term plans and prepares capital budget that aid to achieve goals of business enterprises
(Drake Roulstone and Thornock, 2016).
 Advantages: It helps Bentley motors Ltd to understand the risk which may arise within
organisation due to making investment plan and provide solutions. It is beneficial to
make long term strategic investment plan and also helps to increase the wealth of firm.
The managers of Bentley motors Ltd can offer appropriate control over project's
expenses. It aids management to set the budget for long term and maintain the
profitability for upcoming period.
 Disadvantages: This type of budgeting is irreversible in nature due to involving long
term plans. It does not allow Bentley motors Ltd to make any changes so it may be
difficult for company to get accurate profits. There is need to have skilled and
experienced accountant to prepare the long term budget which is difficult for selected
company to find such accountant in order to perform better. Thus, it may be disadvantage
for organisation to set the long term budget.
Master budget: This is superior document of business organisation that involves
production level, sales, future expenses, capital investment and future sales in order to ascertain
the profitability. In other words, master budget contains various information of transaction in
business that helps to maintain the business. Bentley motors Ltd can use master budget to
maintain the transaction that helps to increase the productivity and profitability.
 Advantages: it helps to increase the productivity and profitability by containing all
information which relates to business transaction. Moreover, Bentley motors Ltd can
focus on goals and objectives by maintaining proper records of transaction. All activities
12

are run by managers by preparing this budget that involves various information and
accounting data. All activities of Bentley motors can be manager by preparing master
budget and profits can be made by management.
 Disadvantages: It may be limitation for Bentley motors Ltd such as time consuming due
to involving number of transactions. Additionally, it can get accurate results within
within organisation. As result low profit margin due to having fraud chances and errors
(Cooper, 2017).
Different types of planning tools and their application
Planning tools are used by organisation to control the excessive budget and maintain the
liquidity within company. Through application of these tools Bentley motors Ltd can build and
forecast the budget which is needed to make correct business decision. The manager of Bentley
motors Ltd can apply different types of tools such as master budget, capital and operating budget
that can helps to control the budget and focus on operating functions of the business industries.
By applying master tools, it can prepare a budget to control the cost or expenses and with the
help of capital budget manager of Bentley motors Ltd can seek for future investment or future
projects.
Annex (C)
13

14

PART B
Uses of management accounting system to react the financial issues
Management accounting system are helpful for business enterprises that can be used to
respond the financial problems which arises within entity. The manager of Bentley motors Ltd
can faces assorted problems while performing business activities. Moreover, it aids to respond
the financial problems by using accounting system (Astuty, 2019).
Financial problem: This types of problems are related with monetary problem which
affects the business industries. The organization should focus on various problems in order to
address the problems. The main purpose is to focus on financial problem which arises within
organization Bentley motors Ltd is facing antithetical financial problems which are defined as:
High spending and low income: organization faces different types of problem due to
having high expenses and low income. Bentley need to focus on these problems in order to gain
profits. The main reason behind this problem is that company do not prepare budget and
expenses are more than income. As result maximization in loss and minimizing in profits.
Unequal cash flow: When cash flow of company like operating, investing and financial
activities does not match then organization has to face financial problems. Bentley can face this
type of financial problem because it does not keep proper records of all transaction. As result
high losses than profits.
Financial governance: This is important tool which is used to measure the financial
problems. Government set some policies and regulations that help to monitor the financial
problems. in this technique, organization need to consider these policies in their business that can
15

help to solve financial problems. This tools can be applied by Bentley motors Ltd to handle the
financial problems and increase the profitability (Samuelsson and et. al., 2016). This can be used
to solve financial problems like unequal cash flow and high spending and low income. Bentley
motors Ltd can use to sole the financial problem which is facing by organization.
There are some techniques which can be used by organization to solve the financial problems
that are defined as:
Bench marking: Its a systematical process that helps to compare the action with other or
competitors. The manager of Bentley motors Ltd can exercise this technique to solve financial
problem by comparing the performance with competitor company like jaguar etc. For solving
financial problems (Agrawal, 2018). It is used to solve the low income and high spending
financial problems which occurs due to having low control on spending.
Key performance indicator: This indicator can be used to solve the financial problem
by evaluating financial and non-financial performance. In this technique, the manager of Bentley
motors Ltd can analysis the performance and helps to know the what should do to overcome the
financial problems. They can use this tools to maintain the financial and non-financial
performance and build strategy accordingly to solve the problems (Goh and Scerri, 2016). It is
used to solve Unequal cash flow which occurred in Bentley motors Ltd.
Comparison among Airdri and Bentley motors Ltd
Basis Airdri Bentley
Financial problem
which is facing by
company
Airdri is hand dryer
manufacturing company which is
facing financial problem due
spending more and its income is
less. So its productivity is going
to decrease continuously. The
manager of Airdri is not
maintaining the record of
transaction and performance. So
it is facing financial problem.
Bentley motors Ltd is an engineering
company which is not meeting with
its objectives because cash flow are
not match with activities. The
manager of Bentley motors Ltd need
to concentrate on cash flow of
business organization that can help
to increase the productivity and
profitability.
System which can To solve the financial problem To solve the financial problems
16

be used to solve
problems
this is facing by Airdri, manager
need to focus on inventory
management system. This
system will help to maintain the
product and services within
organization. In Airdri, manager
and accountant also prepare
inventory management report
that help to solve the monetary
problems by using benchmarking
technique in management
accounting Airdri can compare
with other company and control
the high spending that will help
to solve financial problems.
manager, need to follow the cost
accounting system that will help to
keep records of operating, financial
and investment Activity. Moreover,
it can maximize the profits and
minimize the profitability
(Kerpershoek, Groenleer and de
Bruijn, 2016). By using Key
performance indicator technique
Bentley motors Ltd can monitor on
financial and non financial
performance in order to solve
financial issues.
Respond to financial problems towards sustainable success
To accomplish the goals of business organisation and attain the growth there is need to
solve the monetary issues that arises in organisation. It is beneficial for Bentley motors Ltd as it
provides guidance to manager how to solve the financial problems and can complete the objects.
System helps to maintain the stock and cost of entire business that leads to be sustainable success
of business concern entity. The manger uses different types of accounting system and identify
the financial hurdles which occurs while performing business activities (Zgarni, Hlioui and
Zehri, 2016).
Planning tools for period to accounting towards responding financial issues
Planning tools are the techniques of management accounting which helps to works
effectively by understanding the problems. The manager of Bentley motors Ltd perform business
function smoothly and maintain the productivity. For instance, master budget identifies the
problems which can arises while business activities, as result it can be change according to
17

requirement, capital budget can be used by Bentley motors Ltd to set the long term goals and
make efforts to achieve them in order to make profits. On the other side, operating budget can
help Bentley motors Ltd to detect the financial problems while performing operating activities
within organisation.
CONCLUSION
From this report it has concluded that accounting management is essential for association
as it aid to maintain the records of transaction and also help to make business decision. Managers
prepare assorted reports to know the monetary status of company. Another said, management
accounting system are advantageous to maintain the productivity and profitability within
organisation. The main advantages are that to minimize the risk and increase the productivity.
Planning tools such as capital budget, master budget and operating budget helps business entity
to perform business functions effectively and increase the sustainable organisation success.
Assorted system are used by manager that relates to management accounting that aids to manage
inventory, cost and classify the work in to different sections. Financial issues are solved by
managers by using proper system and approach that leads to sustainable organisation.
18

REFERENCES
Books and Journal
Chan, E. S. and Hsu, C. H., 2016. Environmental management research in
hospitality. International Journal of Contemporary Hospitality Management. 28(5).
pp.886-923.
Hsu, P. H. and Lin, Y. R., 2016. Fair value accounting and Earnings Management. Eurasian
Journal of Business and Management. 4(2). pp.41-54.
Charifzadeh, M. and Taschner, A., 2017. Management accounting and control: tools and
concepts in a Central European context. John Wiley & Sons.
Dai, N. T. and et. al.,2017. IPOs, institutional complexity, and management accounting in hybrid
organisations: a field study in a state-owned enterprise in China.Management
Accounting Research. 36. pp.2-23.
Qian, W. and Schaltegger, S., 2017. Revisiting carbon disclosure and performance: Legitimacy
and management views. The British Accounting Review. 49(4). pp.365-379.
Dayanandan, A. and et. al., 2016. IFRS and accounting quality: legal origin, regional, and
disclosure impacts. International Journal of Accounting and Information Management.
24(3). pp.296-316.
Halaoua, S., Hamdi, B. and Mejri, T., 2017. Earnings management to exceed thresholds in
continental and Anglo-Saxon accounting models: The British and French
cases. Research in International Business and Finance. 39. pp.513-529.
Drake, M. S., Roulstone, D. T. and Thornock, J. R., 2016. The usefulness of historical
accounting reports. Journal of Accounting and Economics. 61(2-3). pp.448-464.
Cooper, R., 2017. Target costing and value engineering. Routledge.
Astuty, W., 2019. An Analysis of the Effects on Application of Management Accounting
Information Systems and Quality Management Accounting Information. KUMPULAN
JURNAL DOSEN UNIVERSITAS MUHAMMADIYAH SUMATERA UTARA. 7(3).
Samuelsson, J. and et. al., 2016. Formal accounting planning in SMEs: The influence of family
ownership and entrepreneurial orientation. Journal of Small Business and Enterprise
Development. 23(3). pp.691-702.
Goh, E. and Scerri, M., 2016. “I study accounting because I have to”: An exploratory study of
hospitality students’ attitudes toward accounting.
Kerpershoek, E., Groenleer, M. and de Bruijn, H., 2016. Unintended responses to performance
management in Dutch hospital care: Bringing together the managerial and professional
perspectives. Public Management Review. 18(3). pp.417-436.
Agrawal, R. K., 2018. Principle of Management Accounting. Educreation Publishing.
Zgarni, I., Hlioui, K. and Zehri, F., 2016. Effective audit committee, audit quality and earnings
management: Evidence from Tunisia. Journal of Accounting in Emerging Economies.
6(2). pp.138-155.
19