Management Accounting Report: Evaluating Bentley Motors' Accounting

This report provides a comprehensive analysis of management accounting practices at Bentley Motors Ltd. It begins with an introduction to management accounting, differentiating it from financial accounting and highlighting its role in internal decision-making. The report then delves into specific systems employed by Bentley Motors, including cost accounting, inventory management, price optimization, and job order costing, detailing their benefits and applications. It further examines various management accounting reports, such as budget reports, performance reports, accounts receivable reports, and inventory management reports, illustrating their significance in monitoring and evaluating the company's performance. The report emphasizes the integration of these systems and reports within the organizational processes, concluding with an overview of cost analysis and its impact on the company's operations. The report utilizes the provided text to analyze the management accounting practices of Bentley Motors Ltd, focusing on cost accounting systems, inventory management, price optimization, and job order costing systems, along with various management reports such as budget reports and performance reports.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
ACTIVITY 1....................................................................................................................................1
PART A...........................................................................................................................................1
P1............................................................................................................................................1
P2 ...........................................................................................................................................3
M1 ..........................................................................................................................................5
D1 ..........................................................................................................................................6
PART B............................................................................................................................................6
P3 ...........................................................................................................................................6
ACTIVITY 2..................................................................................................................................11
PART A.........................................................................................................................................11
P4..........................................................................................................................................11
P5..........................................................................................................................................15
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................19

INTRODUCTION
Accounting management is the method of preparation business records and accounts
which provide exact data about the business, in specific time period (Laudon and Laudon, 2015).
These reports are presenting into financial and statistical information to present in front of
managers. On the basis of these reports they take routine basis decision. In the business prepare
two types of reports in a manner of financial accounting and financial accounting. In
management accounting reports are providing to internal management while financial accounting
provides external people who related within organisation. It is also called as cost accounting and
managerial accounting. In other words, management accounting is a systematic procedures
where business activities conduct in particular steps and prepare program for management for
coordinate and dominant a company. Bentley Motors Ltd, which is a British engineering firm,
has been chosen to understand the significance of management accounting. It was established by
H.M. in 1919. In London, Bentley.
The assignment focus on different types of system as well as report in order to connect
with company process in direct manner. To evaluate the range of management accounting
techniques prepare an income statement using marginal and absorption cost. Apart from the
report, for budgetary control apply various types of preparation tools and compare with other
organisation to respond of financial difficulty.
ACTIVITY 1
PART A
P1
Management Accounting – Management accounting is assist informations to gather data
from several resources to present in front of top executive. In current time period, different
company use gather information to take decision. It is considered as a ongoing process in which
all functional and executive operations are specifically carried out, supervised, controlled and
identified. For all the companies it is essential to assist the performance of company which is
good or not. In selected company managers execute strategic decision for improvement of a
business (Plumb and et.al., 2017).
Management accounting system – It can be described that system is applied into
organisation to collect information from several department. There are analysing and
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determining the financial data of company in reference to take appropriate decision in day to day
activities. These are the basic business practices that is essential for the growth of the services
sector industry. These kinds of management accounting scheme are designed by a department
head and submitted to business management to enable them to create short-term daily company
choice. Management uses four kinds of scheme in Bentley Motors Limited to present their real
status as well as business results. Supervisors attempt to keep adequate accounts with the
assistance of them.
Cost accounting system
It is applied by companies to evaluate the cost of several types of products which is
related to manufacturing. It will help to computation of correct costs at each and every level of
production may have more important to an organisation in order to find out which services are
profit making or which one's are loss bearing. In respective company, apply this system to
calculate the cost of each and every car engineered by a business. It is important for business due
to recognise actual cost of production. So it will help to calculate and evidence all of that
expenses separated. After the process analyze the results with actual aspects to measure
performance of business (Hilton and Platt, 2013).
Inventory management system
The particular system mainly used by manufacturing company to analysis information of
stock at each level of production. It is often utilised at warehouses of shopping malls, digital
marketing business stores, manufacturing organisation and other industry by using access tags,
scan of bar codes to control goods inflow and outflow of finished goods. This scheme is very
helpful in Bentley Motors Limited to determine whether or not the organization has adequate
products for engineering vehicles. It can help to reduce wastages and provide way to better
utilisation of resources. There are described three kind of stock list arrangement system as well
as company utilisation same of the above as per the requirement -
 LIFO (Last in first out) – According to this method, which inventory come in last that is
used for production process first.
 FIFO (First in First out) – According to this method states that stock manage according to
organisation and which are using firstly that was came first for business activities.
 AVOC (Average Cost Method) – This method define that for the business all types of
stocks are used on average cost for manufacturing.
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In Bentley Motor limited applied FIFO method for production process because it is
suitable for various types of models of cars.
Price optimisation system
This system is mainly utilised for set right price of each products which is manufactured into
company. They are trying to set price according to clients requirement and meet expectations to
generate more profits (Hopper and Bui, 2016). This system can help to organisation get get
optimum result and earn profit more than cost. In Bentley Motors Limited, applied this system in
order to set accurate price of their cars then evaluate the reaction of customers for their products.
So it will help to collect information from different clients regrading to their manufacturing
products. As a result it will guide to manager to set appropriate price that supports to fulfil the
requirement of customer and reach to business goals. So company select best pricing strategy to
get success in business.
Job order Costing system
It is a costing system which is related to specific job role and related to cost of production
activities of business. In the context of Bentley Motors Limited, used particular system to
determine the costs of all processes which are conducted as per the client specification. It is
considering as important system due to provide help to analysing of actual cost of each job which
is presented by a company. The particular system mainly used by those enterprises which are
directing the operations of business as per the client's orders.
All the above effectively applied in the Bentley Motors limited and it can help to to
determine the efficiency of a company and execute plan of action judgement for improvement of
it.
P2
Management accounting reports
It is a procedure where various types of reports are produced to provide detailed
information to top management (Stein and et.al., 2015). These information are connected to
several division and help to understater the position of company and how to conduct future
investment to get more profit. These reports are helping to decision making process as well as
providing accurate information. This process evaluate the firm's performance by formulating and
implementing the infrastructural services so that business can be more efficient in future. In This
study is conducted annually in Bentley Motors Limited to monitor records of the company's
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method. There are many techniques used by company executives to generate various kinds of
reports -
Budget Report – This reports is prepared by every organisation to analysis of every
department and collect relevant information which can help in future. It is consider as inner study
that is utilized by director to comparison real and calculate outcomes of a company. The main
purpose to prepare of this report to analysis of all monetary resources to utilised in company or
not. In selected company, supervisor evaluate financial performance and provide data. On the
basis of these data understand that business is good or not (Turban, Volonino and Wood, 2015).
Budget reports has been prepared on weekly basis and compare that business is getting their
goals and objectives or not. At the time preparation of budget define about these human activity
such as Sales, marketing, purchase etc. It is beneficial for business to assess business execution
of an organisation.
Performance Report – The particular report produced by organisation as a reason of
analysing performance of an organization and employees. Performance report used by business
to provide incentive as well as bonus to employees according to their work. As a result
employees motivate and provide their best. In Bentley Motors limited prepared of this type
reports and it can help to attain business goals and objectives. It can observe the performance of
company and staff members in particular accounting period of time after that provide reward
them. It still directs managers to decide quickly and strategically whenever the business are not
doing well.
Accounts Receivable Report – This type report produced to to analysing the credit sales
in particular accounting period time. Such records save all the documents and allow users to
create these document kinds by payment. It enables record all expired loan memoranda and date-
based unused client receipts. In the reference to Bentley Motors Limited formulate of these
document to find out the amount of owed by clients. The main reason to prepare of this report to
evidence collection to those people who take products on credit and paid amount after some
months. So it is important to keep record of those people to collect amount in particular period of
time. It is beneficial for management to understand prominent measure of various clients. If
manager strict for credit policy so customers on time give money back.
Inventory Management Report – It is generated by company to record all detailed
information about raw materials and other inventories which is used in manufacturing process.
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As a result company analysis that how much stock need to every level and how to utilise that for
operations. It will help to fulfil the requirement of a company and have enough stock or not to
carry out their activities. Managers of Bentley Motors Limited execute of this report top tack
record of manufacturing process (Lavia López and Hiebl, 2014). It provide advantage to
company to manage stock in appropriate manner and aware for quantity of inventory. If a
company can not capable to track record effectively so required to apply good action of plan in
good way.
M1
There are defined benefits of these system and it is applicable into effective manner as
per the requirement of Bentley Motors Ltd -
Systems Benefits
Cost accounting system  The particular method is beneficial to set of different
types of products and eliminate unproductive cost
activities.
 Due to changing activities impact on the products and
services.
Inventory Management system  It is beneficial for manufacturing company to analysis
of production level and aware for products.
 Through this system get detailed information feasibly
and save lot of time and space of energy.
Price Optimization system  This system helpful to select optimum price for their
project and help to generate profit.
 It is applicable as price structure as per the client
requirement.
Job order costing system  Through this accounting system a company know about
the cost of specific job role and analysis of past records
regarding to job costing.
 It is applicable to analysis of actual cost regarding to
particular process.
5

D1
The management accounting system and management accounting reports are integrated
with organisational process because these are influencing to management in effective manner. It
is essential for organisation because it will help to get detailed information about the company
and these systems are helpful. There are applied systems are cost accounting, inventory
management, price optimization and job order costing system. These are related to specific
department and help to conduct business operations as well as activities. There is critically
evaluate that inventory management system apply for the
PART B
P3
Cost – The term of cost is amount that is acquire by a person to execute, achieve and sale
out something. There are including the valuation of resources, material, time and opportunity for
manufacturing and delivery of goods as well as services.
Absorption Costing - This technique is utilised by the director of company to determine
the cost that is connected with manufacturing activities of specific product. In Galway plc,
applied this method to assure about the costs which have taken place due to production of
various unit get absorbed from the revenues
Marginal Costing – According to this method defined that fixed cost and variable cost.
In this technique the set price for the timespan is recognized as being completely published
against the commitment and the price of the bases is convicted with variable costs. Even the
price of the item is assumed and it gives gain.
ANNEX (A)
Quarter 1
6

Interpretation: As per the above calculating it is getting that company get profit in the financial
year 150750 in the income statement and net profit about 157750 in the quarter 1.
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Quarter 2
ANNEX (B)
8

9

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ACTIVITY 2
PART A
P4
Planning tools are the instrument which is used by companies to take corrective action
towards organisation goals. A business enterprise can control the excess budget which arises
within business enterprises.
Budget - This means an estimation of expenses of a business organisation. Every
organisation prepares different types of budget that can be used to make future plans and it can
be revised in order to make profits. In other words, budget is the list of all scheduled expenses
and revenues that assist impressive business decision inside entity. The chief purpose of this
budget is to provide a forecast of expenditure and incomes, to get actual financial operating
activities and measure the performance against future that suggest what action should be taken to
make profits. Such as in regard of respective company, manager get ready an estimation of fund
plan and make plans for future that assistance to increase the ratio of production and profitability.
Moreover, it is useful to accomplish the objective of business enterprises through setting the
budget.
Budgetary control - The process which helps to define the various actual results with
estimated figures for future period is considered as budgetary control. This process is used by
organisation to compare the standard budget with real occurred budget which helps to perform
the different business activities. In other words, a system which is used to control the cost by
involving budgets, defining responsibilities, coordinating the department and comparing the
actual performance with budgeted. In Bentley motors Ltd, manager compare the actual
performance with budgeted action for controlling the cost of business enterprises.
The description of different types of planning tools are given below:
Master budget – Its an effective business tool which is used by companies for expected
future sales, purchase, production level and future expenses which is required within
organisation. It is prepared with the helps of financial budgets, income statement and balance
sheet. In Bentley motors Ltd, the manager prepares sales budget, purchase budget and production
fund plan for company's future. The manager make long term business decision with the help of
master budget that helps to control the cost and increase profits. With the help of fund plan
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organisation can set potential value of business organization then can modify if required. The
manager of Bentley motors Ltd uses their skills and prepare budget that helps to maintain the
productivity.
Merits - It assist Bentley Ltd to identify problems and plans for future. For instance, if
one one department is spending more money at individual department budget then managers can
control the excessive expenses that helps to maintain the productivity. As it is superior who
maintain all income and expenses of such company and can modify according.
Demerits - There is lack of speciality that take more time to understand the master
budget and make improvement in budget. So it may be difficult for Bentley motors to get exact
budget for future plans. Therefore company need to concentrate more on such budget in order to
get correct result.
Operating budget – It is associated with budget which relates with incomes and
expenses of business organisation. It helps to set the plans for upcoming future period for
increasing the productivity and profit ratio. It is used to make plans for day to day operational
activities that helps to save from financial losses. It is prepared on the basis of month, quarter,
yearly to maintain the operational functions within organisation. Such as the manager of Bentley
motors Ltd prepares operating budget that aid to keep records of day to day operation for
increasing the production level. Therefore, manager can perform their operational activity
smoothly and effectively.
Merits – It helps to track the actual expenses within organisation in order to maintain the
productivity. The manager of selected company can focus on future project expenses that helps
to build high investment and promote accountability. It save the times of organization due to
performing operating activities smoothly.
Demerits – Master budget has some drawbacks such as the actual cost of running each
department may not match with allocation of expenses. Bentley motors Ltd need to spend more
money to focus on operating activities.
Capital budget – This is major planning tool which is used to evaluate the expected
major projects and investments. It considers capital receipts and payments in order to make long
term planning. In selected company (Bentley), managers make long term plans to meet with
objectives and increase the profitability. The manger focuses on different functions of business
industry in order to make increase the productiveness and earnings.
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Merits – It assist to understand the risk which is involved in the business activities of
business industry and provide solution to overcome the risk. The manager of selected company
(Bentley) can get high return by making long term planning and also helps to create image of
company. Therefore, manager of Bentley motors can make long term plans for the purpose of
meeting with long term objectives.
Demerits – It does not provide accurate results because it is based on assumption which
remain uncertain. As result it can affect Bentley motors Ltd to plan for future period. To prepare
capital budget there is required to have skilled people which is not easy to find, so it may be
difficult for Bentley to complete the long term plans.
Annex (c)
13

Application of planning tools
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Planning instrument are important for organization as it helps to control the excess
budget within organization and maintain the profit margin. The manger of selected company
(Bentley) can apply different types of planning tools that helps to maximize the business
operation. By applying master budget Bentley motors Ltd can get information about all income
and expenses of business industry that help to maintain the profits. Capital budget helps to make
the long term plans in order to increase the business performance and by using operating budget
Bentley motors Ltd can focus on day to day business activities in order to control the excessive
budgets.
P5
In competitive market, there are many organisation who faces contrastive financial
problems which is needed to solve by organisation in order to make business in up position. The
financial problems must be respond by organisation in order to make profits. All organisation
want to focus on financial stability in order to operate the business activities. This is basic
problem which arises within company due to running a business. The manager of business
organization need to focus on such problems and should find out the solution of such problems.
Bentley motor Ltd is dealing in motors that uses new technology while manufacturing products.
It is facing problems due to running a business that can reduce its profits. The selected company
(Bentley) faces various financial challenges that are outlined as:
Poor Cash Management – This is important for the firm to engage highly skilled
workers so that all the accounting information can be treated in appropriate manner.
Management needs to handle the current situation to asses the cash flow system by limiting the
credit policy period and preventing from jerky expenses. If manager do not focus on cash
management then it has to face the financial problem as result low productivity and profitability.
The manger of selected company (Bentley) need to manage the cash to solve the financial
problems.
Late payment by debtors: The another financial problems is late payment by debtors
which is arises while performing business activities. Bentley motors Ltd sale the products on
credit for a fixed period of time. At the maturity period creditors deny to pay the amount or get
more time to pay the amounts. As result it faces financial issues which arises due to late
payments.
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The Bentley motors Ltd need to focus on techniques that can be used to resolve the
financial problems like as:
Key Performance Indicator (KPI): This is tool which is utilized to evaluate the fiscal
and non fiscal execution of business entities. Bentley motors Ltd can use this technique to
monitor the financial and non financial performance and increase the productivity. It is used by
management to identify the policies which relates to business organization and provide solutions.
Therefore, KPI is a best tool to measure the financial and non financial performance of selected
company. By using this tool organization can get where it required to make improvements and
how it can achieve goals.
Bench marking – It is used by companies to compare the performance of one
organization to other organization. This is effective strategy which can helps selected company
(Bentley) to compare the performance and make improvement in performance if is required in
order to solved the financial problems. This tool is also effective in which manager can compare
performance with other organization and can change accordingly.
Financial Governance - It is a part of better corporate governance which ensures that
every penny is dealt with care and justified manner. It acts as a measure to counter the possible
misfeasance to which every organization is prone. It helps to empower the trust of various
stakeholders in the proceedings of the organizational business defining a set of code of conduct
to financial data. Selected company (Bentley) can use this tools to solve the financial problems
by focusing on money measurement and making credit policy within organization
(Wickramasinghe and Alawattage, 2012).
Comparison between Bentley motors Ltd and Airdri
Basis Bentley motors Ltd Airdri
Financial problem The manager of Bentley motors Ltd
has find the financial problem which is
faced by organisation. The financial
problem is late payment by creditors
that reduces its profits and increases
debts.
This is manufacturing company
which is facing financial problem
due to poor cash management. The
manager of Airdri are not able to
manage the funds properly within
organisation.
System The management should use cost The management should use Price
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accounting system that will helps to
maintain the records of all income and
expenses within organisation.
Moreover, it can keep records of
creditors whose payment is due that
helps to solve the financial problems.
optimisation system that will helps
to set the prices of products and
services. By using this system
manager can focus on prices by
maintaining the records of cash.
Management accounting can lead organisations to sustainable success
In today's economy world, there are so many hurdles which create problems for
organizations in running their business. Every company needs an efficacious planning structure
which can efficiently resolve these financial problems. Management accounting suggests various
techniques to identify the problems and also provides solutions to cope up with the same. In case
of respective firm, various financial problems such as delayed payments, unforeseen expenses,
weak fund management, etc. can be identified with the help of KPI and benchmarking
procedures. Financial governance provides effective methods like following accounting
standards and making research strategies to solve these issues.
Planning tools respond appropriately respond to solving financial problems:
Different types of financial planning tools are prepared by managerial accountant to
planning business strategies and make appropriate decisions. Selected firm create cash budget,
master budget and operating budget with the help of all its data and information. Operating
budget helps to derive cost of goods sold and profit margin on production while cash budget
assist the management to sustain required cash through out the year and maintain the liquidity of
the organization. Master budget provides an overall view of organizational objective and
performance accordingly for allocation of funds among various functional departments (Maas,
Schaltegger and Crutzen, 2016).
CONCLUSION
From the report it has terminated that every organisation use managerial accounting to
conduct various business action and their operations. There are also using their systems and
reports which are defined about the manufacturing process and provide all detail information
regarding to company. These are integrated with organisational process in direct manner and
provide many advantages. There are applied various planning tools like capital budget, operating
17

monetary fund and master monetary fund to prepare and forecast to situation of business. To run
business face various types of problems in their business. It will solve assorted accounting
system and use different method like KPI, benchmarking then sort out with financial governance.
18

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