Management Accounting Report: Financial Analysis of Rolls Royce
VerifiedAdded on 2023/01/19
|23
|6457
|54
Report
AI Summary
This report delves into the application of management accounting principles within Rolls Royce Motor Cars Limited. It begins by defining management accounting, differentiating it from financial accounting, and highlighting its significance in monitoring expenses, maintaining profitability, and financial planning. The report then outlines various managerial accounting systems utilized by Rolls Royce, including inventory management, cost accounting, and price optimization. Furthermore, it explores different types of management accounting reports, such as budget reports, accounts receivable aging reports, cost accounting reports, inventory management reports, and performance reports. The report also discusses the benefits of applying these systems, such as reducing the risk of overselling and efficient cost allocation. Finally, it addresses how organizations, like Rolls Royce, can leverage management accounting to respond to and solve financial problems through planning tools and strategic financial management.

Management
Accounting
Accounting
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser

Table of Contents
INTRODUCTION...........................................................................................................................1
LO1..................................................................................................................................................1
Role and significance of Management Accounting System:.......................................................1
LO2..................................................................................................................................................3
Various reports to management accounting.................................................................................3
Application and Benefits of Managerial accounting System:.....................................................5
Critically evaluation of management accounting system and accounting reporting...................6
LO2..................................................................................................................................................7
Calculation of cost by using appropriate technique.....................................................................7
M2 Application of range of management accounting..................................................................8
Interpretation of data and range of activities .............................................................................9
LO3..................................................................................................................................................9
About planning tools that controls budgets.................................................................................9
Uses of different types of planning tools..................................................................................12
LO4................................................................................................................................................12
Organisation are adopting management accounting system to respond towards problem.......12
Respond to financial problems...................................................................................................15
Planning tools for responding financial problems.....................................................................16
CONCLUSON...............................................................................................................................16
REFERENCE.................................................................................................................................17
INTRODUCTION...........................................................................................................................1
LO1..................................................................................................................................................1
Role and significance of Management Accounting System:.......................................................1
LO2..................................................................................................................................................3
Various reports to management accounting.................................................................................3
Application and Benefits of Managerial accounting System:.....................................................5
Critically evaluation of management accounting system and accounting reporting...................6
LO2..................................................................................................................................................7
Calculation of cost by using appropriate technique.....................................................................7
M2 Application of range of management accounting..................................................................8
Interpretation of data and range of activities .............................................................................9
LO3..................................................................................................................................................9
About planning tools that controls budgets.................................................................................9
Uses of different types of planning tools..................................................................................12
LO4................................................................................................................................................12
Organisation are adopting management accounting system to respond towards problem.......12
Respond to financial problems...................................................................................................15
Planning tools for responding financial problems.....................................................................16
CONCLUSON...............................................................................................................................16
REFERENCE.................................................................................................................................17

INTRODUCTION
Today's dynamic market is very competitive and create a new issue for the organizations
everyday. Most of these issues are related to the core operations and functions of the companies.
Financial accounting is just for the use of external stakeholders and able to provide any solid
solutions for internal core issues (Weetman, 2019). Therefore, a new accounting system has been
developed to provide the filtered data and adequate information to the internal management
system that is known as management accounting. An enhanced study of management accounting
can help in solving internal as well as external problems.
Rolls Royce Motor Car Limited is a British automotive establishment that has been
chosen for preparing this report. The organization was founded with its name in 1998 as a
subsidiary company of BMW and deals in manufacturing and distribution of luxury cars in
international market. This report is able to provide the information about the role of management
accounting, system that is developed by this framework, several reports which are created in this
system, assorted costing techniques, budget and budgetary control, financial problems and
techniques that can be utilised to solve those financial issues (Booth, 2018).
LO1
Role and significance of Management Accounting System:
Management Accounting - At the starting of 19th century, it has been felt by the big
manufacturing establishments that they need a system that can help them to handle internal
matters. Hence, an accounting system was created that collect, classify, filter, record, manage,
report and control all the financial and non-financial content in such a manner that administration
of the establishment can consider them as evidences for preparing plans, creating strategies and
making decisions regarding achievement of organizational goals. This framework has been
specially evolved for the internal stakeholders so that they can manage regular functioning.
Difference between management accounting and financial accounting
Basis Management accounting Financial accounting
Meaning This means to identify and classify
the information. An d also control
the business activities.
To identify the financial
information which are related only
money.
Today's dynamic market is very competitive and create a new issue for the organizations
everyday. Most of these issues are related to the core operations and functions of the companies.
Financial accounting is just for the use of external stakeholders and able to provide any solid
solutions for internal core issues (Weetman, 2019). Therefore, a new accounting system has been
developed to provide the filtered data and adequate information to the internal management
system that is known as management accounting. An enhanced study of management accounting
can help in solving internal as well as external problems.
Rolls Royce Motor Car Limited is a British automotive establishment that has been
chosen for preparing this report. The organization was founded with its name in 1998 as a
subsidiary company of BMW and deals in manufacturing and distribution of luxury cars in
international market. This report is able to provide the information about the role of management
accounting, system that is developed by this framework, several reports which are created in this
system, assorted costing techniques, budget and budgetary control, financial problems and
techniques that can be utilised to solve those financial issues (Booth, 2018).
LO1
Role and significance of Management Accounting System:
Management Accounting - At the starting of 19th century, it has been felt by the big
manufacturing establishments that they need a system that can help them to handle internal
matters. Hence, an accounting system was created that collect, classify, filter, record, manage,
report and control all the financial and non-financial content in such a manner that administration
of the establishment can consider them as evidences for preparing plans, creating strategies and
making decisions regarding achievement of organizational goals. This framework has been
specially evolved for the internal stakeholders so that they can manage regular functioning.
Difference between management accounting and financial accounting
Basis Management accounting Financial accounting
Meaning This means to identify and classify
the information. An d also control
the business activities.
To identify the financial
information which are related only
money.
⊘ This is a preview!⊘
Do you want full access?
Subscribe today to unlock all pages.

Trusted by 1+ million students worldwide

Aim The main aim is to provide
information to internal users
To provide information to external
users.
Needed In this reports and statement are
prepared on the basis of requirement.
Reports are statement are prepared
for a definite period such as
quarterly, monthly, half yearly and
annually.
Concentration It mainly concentrates on relevancy
and flexibility of data.
It mainly concentrates on
generating data accurately and
timely.
Managerial accounting is a crucial part of the organization as it plays significant role in
management. Some of its roles in Rolls Royce Limited are described below:
Monitor expenses - With the help of various techniques, statics and budgets, managers
are able to determine the actual cost centres and allocate the expenses. This helps in monitor and
control the expenses and utilize the valuable funds optimistically.
Maintain profitability - Management accounting provide various tools such as break-
even analysis, sales-volume ratio, etc. that helps the administration in evaluating the sales,
desired profit and other factors that assist it in maintaining the profitability of the firm.
Financial planning - This accounting system is also plays an important role in planning
financial strategies of the company by providing significant data and information to the financial
department of the organization so that it can make decisions regarding huge investments
(BARARI, BANIMAHD and YAGHOUBNEJAD, 2018).
Explain consequences - With the help of their knowledge, experience and skills,
managerial accountant may also explain the effects of any financial decision on the funds and
operations of the company. They identify the consequences of any activity on the budget.
Management Accounting System - The framework of managerial accounting divided
the process into different parts and developed systems for managing the assorted departments
and activities. The system that has been developed for managing the operations and deriving data
from them, is known as managerial accounting system. This system helps in preparing reports for
information to internal users
To provide information to external
users.
Needed In this reports and statement are
prepared on the basis of requirement.
Reports are statement are prepared
for a definite period such as
quarterly, monthly, half yearly and
annually.
Concentration It mainly concentrates on relevancy
and flexibility of data.
It mainly concentrates on
generating data accurately and
timely.
Managerial accounting is a crucial part of the organization as it plays significant role in
management. Some of its roles in Rolls Royce Limited are described below:
Monitor expenses - With the help of various techniques, statics and budgets, managers
are able to determine the actual cost centres and allocate the expenses. This helps in monitor and
control the expenses and utilize the valuable funds optimistically.
Maintain profitability - Management accounting provide various tools such as break-
even analysis, sales-volume ratio, etc. that helps the administration in evaluating the sales,
desired profit and other factors that assist it in maintaining the profitability of the firm.
Financial planning - This accounting system is also plays an important role in planning
financial strategies of the company by providing significant data and information to the financial
department of the organization so that it can make decisions regarding huge investments
(BARARI, BANIMAHD and YAGHOUBNEJAD, 2018).
Explain consequences - With the help of their knowledge, experience and skills,
managerial accountant may also explain the effects of any financial decision on the funds and
operations of the company. They identify the consequences of any activity on the budget.
Management Accounting System - The framework of managerial accounting divided
the process into different parts and developed systems for managing the assorted departments
and activities. The system that has been developed for managing the operations and deriving data
from them, is known as managerial accounting system. This system helps in preparing reports for
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser

the management to make decisions. Some of the managerial accounting systems that are utilised
by the Rolls Royce Limited, are given below:
Inventory Management System - Inventory management system can be defined as the
combination of effective procedures and utilization of technology that monitor, maintain and
control the products or stock of the company. It track the stock from the process of purchasing
raw material to sold goods. An effective inventor management system requires information of
suppliers and distributors, integration with online marketing platform, order fulfilment and
management data, warehouse reports and automated inventory tracking software system that may
help in evaluating inventory with LIFO, FIFO or WAC method.
LIFO (Last In First Out) - This method suggests that the product that has been
manufactured first must be sold first so that retailing can be reflected accurately.
FIFO (First In First Out) - It assumes that the product which has entered into the
inventory last must be sold first (Murthy and Rooney, 2018).
WAC (Weighted Average Cost) - This method suggests that inventory must be evaluated
on an average cost of production.
Cost Accounting System - A cost accounting system is the most crucial and significant
part of managerial accounting process. This is the framework that is used by the business heads
to estimate and evaluate the costs and expenses, analyse the profitability of the company, stock
management and controlling the various costs. The costing system uses various costing methods
to evaluate the costs of assorted production lines. The system requires frequent and accurate raw
data, factory layout, production procedures, information of various cost centres, etc. to provide
and manage effectiveness to the production process.
Price Optimization System - Price optimization system is a statistical framework that
evaluate the variance in demand of the any product in relation to the fluctuation in the price
level. This system is utilized within the company to tailoring the prices according to the different
segments of the consumers. This system requires historical data, product volume, market
conditions, competitors' prices, seasonal conditions, product availability, etc. to make the
decisions regarding optimum prices.
by the Rolls Royce Limited, are given below:
Inventory Management System - Inventory management system can be defined as the
combination of effective procedures and utilization of technology that monitor, maintain and
control the products or stock of the company. It track the stock from the process of purchasing
raw material to sold goods. An effective inventor management system requires information of
suppliers and distributors, integration with online marketing platform, order fulfilment and
management data, warehouse reports and automated inventory tracking software system that may
help in evaluating inventory with LIFO, FIFO or WAC method.
LIFO (Last In First Out) - This method suggests that the product that has been
manufactured first must be sold first so that retailing can be reflected accurately.
FIFO (First In First Out) - It assumes that the product which has entered into the
inventory last must be sold first (Murthy and Rooney, 2018).
WAC (Weighted Average Cost) - This method suggests that inventory must be evaluated
on an average cost of production.
Cost Accounting System - A cost accounting system is the most crucial and significant
part of managerial accounting process. This is the framework that is used by the business heads
to estimate and evaluate the costs and expenses, analyse the profitability of the company, stock
management and controlling the various costs. The costing system uses various costing methods
to evaluate the costs of assorted production lines. The system requires frequent and accurate raw
data, factory layout, production procedures, information of various cost centres, etc. to provide
and manage effectiveness to the production process.
Price Optimization System - Price optimization system is a statistical framework that
evaluate the variance in demand of the any product in relation to the fluctuation in the price
level. This system is utilized within the company to tailoring the prices according to the different
segments of the consumers. This system requires historical data, product volume, market
conditions, competitors' prices, seasonal conditions, product availability, etc. to make the
decisions regarding optimum prices.

LO2
Various reports to management accounting
Management accounting reports are written document which are prepared by
management in order to maintain proper records of transactions and data. It helps to know that
what is going on within business organisation. It is like summary report that gives explanation
about every transaction and performance of business industry. There are different types of
management report which are used by Rolls Royce Motor Cars Limited by collecting data that
helps to give valuable information regarding operations. In other words, the operation of
organisation may be smooth and controllable by preparing different types of accounting reports.
In context to Rolls Royce Motor Cars Limited, different types of management report are
prepared by management such as:
Budget report - Budget estimation is required at every stage within all organisation that
gives estimation about cost of activities and states how it can be control. It is important to
understand how much amount need to invest in organisational activities in order to run a
business. It is prepared by manager who have knowledge about expenses of organisation and can
be control to overcome by performing business performance. For instance, Rolls Royce Motor
Cars Ltd 's managers get the estimation of their expenses of each department that helps to
prepare a budget report. By using this budget report they can reduce the cost of organisation
which leads to profitability.
Account receivable Aging report - Credit purchase and sale of goods is the main
function of any business that helps to stable the enterprise in business market. It is important for
any business to offer a credit to its customers so, they be connected with organisation for long
period of time. This report covers date, time, amount and other information which is provided by
customers for paying credit amounts. In context to Rolls Royce Motor Cars Ltd, this report is
prepared by management in order to keep records of all credit transaction and data that helps to
receive the payment on specified time. Credit period involves 30, 60 and 90 days late to pay the
amount. This report is associated with different credit policies and legislation that aids to get
payment on time as customer has promise to pay (Burritt and Christ, 2017).
Cost accounting report - Cost structure is required in all businesses that covers cost the
business organisation during performing business activities. This report is highly connected with
cost of products and services that helps to evaluate the efficiency of organisation. Organisation
Various reports to management accounting
Management accounting reports are written document which are prepared by
management in order to maintain proper records of transactions and data. It helps to know that
what is going on within business organisation. It is like summary report that gives explanation
about every transaction and performance of business industry. There are different types of
management report which are used by Rolls Royce Motor Cars Limited by collecting data that
helps to give valuable information regarding operations. In other words, the operation of
organisation may be smooth and controllable by preparing different types of accounting reports.
In context to Rolls Royce Motor Cars Limited, different types of management report are
prepared by management such as:
Budget report - Budget estimation is required at every stage within all organisation that
gives estimation about cost of activities and states how it can be control. It is important to
understand how much amount need to invest in organisational activities in order to run a
business. It is prepared by manager who have knowledge about expenses of organisation and can
be control to overcome by performing business performance. For instance, Rolls Royce Motor
Cars Ltd 's managers get the estimation of their expenses of each department that helps to
prepare a budget report. By using this budget report they can reduce the cost of organisation
which leads to profitability.
Account receivable Aging report - Credit purchase and sale of goods is the main
function of any business that helps to stable the enterprise in business market. It is important for
any business to offer a credit to its customers so, they be connected with organisation for long
period of time. This report covers date, time, amount and other information which is provided by
customers for paying credit amounts. In context to Rolls Royce Motor Cars Ltd, this report is
prepared by management in order to keep records of all credit transaction and data that helps to
receive the payment on specified time. Credit period involves 30, 60 and 90 days late to pay the
amount. This report is associated with different credit policies and legislation that aids to get
payment on time as customer has promise to pay (Burritt and Christ, 2017).
Cost accounting report - Cost structure is required in all businesses that covers cost the
business organisation during performing business activities. This report is highly connected with
cost of products and services that helps to evaluate the efficiency of organisation. Organisation
⊘ This is a preview!⊘
Do you want full access?
Subscribe today to unlock all pages.

Trusted by 1+ million students worldwide

are running their businesses as have idea that states where money is being spent and how it can
be make better for future. Rolls Royce Motor Cars Ltd. Is using this report to know the actual
and estimated cost of business firm. For instance, Rolls Royce Motor Cars Ltd is going to
restructuring that prepare cost accounting report in order to know the actual cost of its activities
on which it is spending money. Therefore, this report is beneficial for Rolls Royce Motors to
reduce the actual cost by controlling and increase profitability.
Inventory management report - Inventory refers as raw material, finished goods and
working capital which is important to maintain by manufacturing organisation. This report is
mainly prepared by manufacturing industry in order to maintain records of all stoked goods. It is
required because some time it become more difficult to know which material is out of stock and
which one in high quantity. Therefore, this report is used to maintain all information towards
inventory of organisation. In context to Rolls Royce Motor Cars Ltd, variety of raw material and
finished goods are stored by organisation in their warehouse that helps to maintain by using
inventory report. With the help of this report organisation can get proper records of under stock
and out of stock material (Mufid, 2019).
Performance report - This report mainly focus on organisational performance which is
important to take right decisions. It is prepared by management who analysis the organisational
performance and presented to shareholders. It is valuable for shareholder as they make
investment decisions by evaluating the organisational performance. This report is baseline of
investors who seek the performance of business industry and take the corrective actions. In
context to Rolls Royce Motor Cars Ltd, performance report is prepared by management in order
to get concise, clear and true picture of business organisation which helps to recommended
appropriate suggestions and actions.
Therefore, all management accounting reports are prepared by Rolls Royce Motor Cars
Ltd that in order to operate and restructuring their business successfully. Information are
provided by managers should be accurate, relevant and timely that helps to maintain the business
activities effectively and make right decisions in order to accomplishment of goals. If
information are not presented timely then decision be de delay that can effect negatively Rolls
Royce Motor Cars Ltd's performance.
Application and Benefits of Managerial accounting System:
Management Applications Benefits
be make better for future. Rolls Royce Motor Cars Ltd. Is using this report to know the actual
and estimated cost of business firm. For instance, Rolls Royce Motor Cars Ltd is going to
restructuring that prepare cost accounting report in order to know the actual cost of its activities
on which it is spending money. Therefore, this report is beneficial for Rolls Royce Motors to
reduce the actual cost by controlling and increase profitability.
Inventory management report - Inventory refers as raw material, finished goods and
working capital which is important to maintain by manufacturing organisation. This report is
mainly prepared by manufacturing industry in order to maintain records of all stoked goods. It is
required because some time it become more difficult to know which material is out of stock and
which one in high quantity. Therefore, this report is used to maintain all information towards
inventory of organisation. In context to Rolls Royce Motor Cars Ltd, variety of raw material and
finished goods are stored by organisation in their warehouse that helps to maintain by using
inventory report. With the help of this report organisation can get proper records of under stock
and out of stock material (Mufid, 2019).
Performance report - This report mainly focus on organisational performance which is
important to take right decisions. It is prepared by management who analysis the organisational
performance and presented to shareholders. It is valuable for shareholder as they make
investment decisions by evaluating the organisational performance. This report is baseline of
investors who seek the performance of business industry and take the corrective actions. In
context to Rolls Royce Motor Cars Ltd, performance report is prepared by management in order
to get concise, clear and true picture of business organisation which helps to recommended
appropriate suggestions and actions.
Therefore, all management accounting reports are prepared by Rolls Royce Motor Cars
Ltd that in order to operate and restructuring their business successfully. Information are
provided by managers should be accurate, relevant and timely that helps to maintain the business
activities effectively and make right decisions in order to accomplishment of goals. If
information are not presented timely then decision be de delay that can effect negatively Rolls
Royce Motor Cars Ltd's performance.
Application and Benefits of Managerial accounting System:
Management Applications Benefits
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser

Accounting
System
Inventory
Management
System
Rolls Royce Limited applied this
system for tracking the movement of
its stock and use advance software to
maintain the accuracy and evaluate the
inventory on FIFO basis.
This management system helps
the administration in reducing
the risk of overselling.
This also ensure the avoidance
of excess stock or shortage of
inventory.
Cost
Accounting
System
The application of this system in
selected organization allows the
allocation of costs in actual and
normal costing system.
Cost accounting system is
helpful in classification and
subdivision of various costs.
The system is also helpful in
increasing the quality of
products and efficiency of
workers.
Price
Optimization
System
The company applies analytical and
yield management price optimization
techniques for making its pricing
strategies.
It helps in understanding the
buying patterns or market
trends.
The respective system
minimize the manual work and
encourage the automation in
the company.
Critically evaluation of management accounting system and accounting reporting
Management accounting system and reports are integrated with organisational process as
system contributes to the continuous improvement in company and reports provide a information
regarding particular thing that helps to improve profitability. System and reports are integrated
with Rolls Royce Motor Cars Ltd process as system are used to get information and take
corrective actions which is possible through prepared accounting reports. For instance,
management of Rolls Royce are using inventory management system and prepare inventory
System
Inventory
Management
System
Rolls Royce Limited applied this
system for tracking the movement of
its stock and use advance software to
maintain the accuracy and evaluate the
inventory on FIFO basis.
This management system helps
the administration in reducing
the risk of overselling.
This also ensure the avoidance
of excess stock or shortage of
inventory.
Cost
Accounting
System
The application of this system in
selected organization allows the
allocation of costs in actual and
normal costing system.
Cost accounting system is
helpful in classification and
subdivision of various costs.
The system is also helpful in
increasing the quality of
products and efficiency of
workers.
Price
Optimization
System
The company applies analytical and
yield management price optimization
techniques for making its pricing
strategies.
It helps in understanding the
buying patterns or market
trends.
The respective system
minimize the manual work and
encourage the automation in
the company.
Critically evaluation of management accounting system and accounting reporting
Management accounting system and reports are integrated with organisational process as
system contributes to the continuous improvement in company and reports provide a information
regarding particular thing that helps to improve profitability. System and reports are integrated
with Rolls Royce Motor Cars Ltd process as system are used to get information and take
corrective actions which is possible through prepared accounting reports. For instance,
management of Rolls Royce are using inventory management system and prepare inventory

report in order to track inventory properly and run business process accurately. Moreover, by
using cost accounting system and price optimisation system a cost accounting report has been
prepared that is used to know how can such organisation can reduce irrelevant cost and increase
profits. Therefore, it has defined that management accounting system and reports are integrated
with company process that helps to run a business effectively.
LO2
Calculation of cost by using appropriate technique
Cost – It refers as organisational expenses or cost which are incurred in company in the
form of performing business activities. It also include legal and promotional fees which create
cost for business organisation. Business organisation should focus on expenditure that need to
maintain in order to earn profitability. It covers two types of costing technique which are as
explained:
Absorption costing – This refers as absorption of all cost which incurs within
organisation at the time of running a business. It covers fixed and variable cost that are used to
run business activities.
Marginal costing – This costing technique covers only variable cost as product cost
which ignores fixed cost. Fixed cost in this method consider as unit cost that are not involves in
order to prepare income statement.
(Calculation are in Appendix )
M2 Application of range of management accounting
Different types of costing technique are used by Rolls Royce Motor Cars Ltd such as
marginal costing and absorption costing that states different profits. By using both technique
organisation get information that which technique is appropriate to make high profits and how it
can get higher profits. Moreover, it provides an appropriate financial reporting document that
helps to control over cost (Piontek, Malinowska and Cyplik, 2018). From the above discussion it
has understood that Rolls Royce Motors has used management accounting system and techniques
to produce the income statement. System such as inventory management, cost accounting and
using cost accounting system and price optimisation system a cost accounting report has been
prepared that is used to know how can such organisation can reduce irrelevant cost and increase
profits. Therefore, it has defined that management accounting system and reports are integrated
with company process that helps to run a business effectively.
LO2
Calculation of cost by using appropriate technique
Cost – It refers as organisational expenses or cost which are incurred in company in the
form of performing business activities. It also include legal and promotional fees which create
cost for business organisation. Business organisation should focus on expenditure that need to
maintain in order to earn profitability. It covers two types of costing technique which are as
explained:
Absorption costing – This refers as absorption of all cost which incurs within
organisation at the time of running a business. It covers fixed and variable cost that are used to
run business activities.
Marginal costing – This costing technique covers only variable cost as product cost
which ignores fixed cost. Fixed cost in this method consider as unit cost that are not involves in
order to prepare income statement.
(Calculation are in Appendix )
M2 Application of range of management accounting
Different types of costing technique are used by Rolls Royce Motor Cars Ltd such as
marginal costing and absorption costing that states different profits. By using both technique
organisation get information that which technique is appropriate to make high profits and how it
can get higher profits. Moreover, it provides an appropriate financial reporting document that
helps to control over cost (Piontek, Malinowska and Cyplik, 2018). From the above discussion it
has understood that Rolls Royce Motors has used management accounting system and techniques
to produce the income statement. System such as inventory management, cost accounting and
⊘ This is a preview!⊘
Do you want full access?
Subscribe today to unlock all pages.

Trusted by 1+ million students worldwide

price optimisation system are used by Rolls company in order to prepare income statement. For
producing this, it used marginal and absorption technique that helped to get profits.
Interpretation of data and range of activities
Financial reports are useful for organisation that helps to get the information about range
of activities and states profitability. For instance, Rolls Royce Motor Cars Ltd has used both
technique to prepare the financial report which helps to attain business objectives by performing
all business activities efficiently (Laing and Perrin, 2018). To produce the income statement MA
techniques such as marginal and absorption are used by management that helped to know
profitability and effective method to make profits further.
LO3
About planning tools that controls budgets
Planning tools - It refers as instrument which is used by all business concerns to control
the budget of organisation and increase productivity as well as profitability. Planning tools are
used by all organisation that guides how company is related to program, intervention and
implementation of initiative in order to make profits. In other words, planning tools are consider
as financial planning or best tool that is used to achieve the business objectives. For instance,
Rolls Royce Motor Cars Ltd is using different types of planning tools that states where
organisation should spent their money in order to maximize profitability (Mohr, Raudla and
Douglas, 2018).
Budgetary control is a process that helps managers to set the financial and performance
goals by comparing with past performance. It gives a true and fair view of accounting transaction
that are used to increase the productivity. Rolls Royce Motor Cars Ltd is focusing on budgetary
control that helps to increase the business performance by comparing with actual and budgeted
activities. Different types of budgets are acts are planning tool that are as defined:
Zero base budget - Whenever organisation is going to start a business from new period
then zero base budget is using by such industry. This budget is not basis on past budget or
information that only start with fresh transactions. This mainly advantageous for start up
organisation in which there is not need to cover any past data and budget. In context to Rolls
Royce Motor Cars Ltd, management can prepare zero base budget in starting of new year that
helps to maintain the business performance (Ogundele, 2018).
producing this, it used marginal and absorption technique that helped to get profits.
Interpretation of data and range of activities
Financial reports are useful for organisation that helps to get the information about range
of activities and states profitability. For instance, Rolls Royce Motor Cars Ltd has used both
technique to prepare the financial report which helps to attain business objectives by performing
all business activities efficiently (Laing and Perrin, 2018). To produce the income statement MA
techniques such as marginal and absorption are used by management that helped to know
profitability and effective method to make profits further.
LO3
About planning tools that controls budgets
Planning tools - It refers as instrument which is used by all business concerns to control
the budget of organisation and increase productivity as well as profitability. Planning tools are
used by all organisation that guides how company is related to program, intervention and
implementation of initiative in order to make profits. In other words, planning tools are consider
as financial planning or best tool that is used to achieve the business objectives. For instance,
Rolls Royce Motor Cars Ltd is using different types of planning tools that states where
organisation should spent their money in order to maximize profitability (Mohr, Raudla and
Douglas, 2018).
Budgetary control is a process that helps managers to set the financial and performance
goals by comparing with past performance. It gives a true and fair view of accounting transaction
that are used to increase the productivity. Rolls Royce Motor Cars Ltd is focusing on budgetary
control that helps to increase the business performance by comparing with actual and budgeted
activities. Different types of budgets are acts are planning tool that are as defined:
Zero base budget - Whenever organisation is going to start a business from new period
then zero base budget is using by such industry. This budget is not basis on past budget or
information that only start with fresh transactions. This mainly advantageous for start up
organisation in which there is not need to cover any past data and budget. In context to Rolls
Royce Motor Cars Ltd, management can prepare zero base budget in starting of new year that
helps to maintain the business performance (Ogundele, 2018).
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser

Advantages - This is flexible budget that focused on operation, low cost and high
disciplined execution of business activities. This budget helps to justify the all operating
expenses of Rolls Royce Motor Cars Ltd that generate high revenues. Moreover, it helps to
allocate the resources in proper format resulting achievement of organisational goals. This helps
to get the actual profit and loss which incurred in financial year. By using this budget
organisation can set its short term goals which helps to get the profits.
Disadvantages - The major shortcoming of zero base budget is that it can reward short
term thinking through shifting available resources in different area of company that generate
revenues for next budgeting or calender year. Moreover, this budget can be manipulated by
managers of Rolls Royce Motor Cars Ltd as they have all information and resources that ca lead
to change culture. This shows only current year profits and loss because it does not involves any
past information.
Cash budget – This budget is important for organisation that helps to manage the cash
within organisation. This budget allows an enterprise to establish the credit amount that can be
extend to clients without having problems and liquidity. It is crucial for all organisation that are
used to avoid shortcoming of cash in financial year and increase the profitability. In other words,
cash budget is an estimation of cash flows that helps to maintain the records of expenses and
incomes. For instance, Rolls Royce Motor Cars Ltd is preparing cash budget that helps to
identify the availability of cash and revenues to meet with future requirements which helps to
make higher profits.
Advantages – By using cash budget management of Rolls Royce Motor Cars Ltd can
avoid the debt as it helps to find the shortcoming and adjust according from excess funds. This
helps to track the all cash habits and allocate the funds according in order to operate business
efficaciously. Moreover, it increases the efficiencies and financial resources of organisation
which increases profitability. It enhance the financial position of company. By using this
organisation can avoid the debt by preparing cash budget and it helps to make correct budget. It
also require attention to detail, tracking specific habits by managing cash in organisation.
Disadvantages – It can create danger or theft for organisation in case of not tracking the
cash flows properly. Tracking of cash is difficult for organisation that can be threat for Rolls
Royce Motor Cars Ltd to arrange the cash resources properly. Moreover, it can limits the
disciplined execution of business activities. This budget helps to justify the all operating
expenses of Rolls Royce Motor Cars Ltd that generate high revenues. Moreover, it helps to
allocate the resources in proper format resulting achievement of organisational goals. This helps
to get the actual profit and loss which incurred in financial year. By using this budget
organisation can set its short term goals which helps to get the profits.
Disadvantages - The major shortcoming of zero base budget is that it can reward short
term thinking through shifting available resources in different area of company that generate
revenues for next budgeting or calender year. Moreover, this budget can be manipulated by
managers of Rolls Royce Motor Cars Ltd as they have all information and resources that ca lead
to change culture. This shows only current year profits and loss because it does not involves any
past information.
Cash budget – This budget is important for organisation that helps to manage the cash
within organisation. This budget allows an enterprise to establish the credit amount that can be
extend to clients without having problems and liquidity. It is crucial for all organisation that are
used to avoid shortcoming of cash in financial year and increase the profitability. In other words,
cash budget is an estimation of cash flows that helps to maintain the records of expenses and
incomes. For instance, Rolls Royce Motor Cars Ltd is preparing cash budget that helps to
identify the availability of cash and revenues to meet with future requirements which helps to
make higher profits.
Advantages – By using cash budget management of Rolls Royce Motor Cars Ltd can
avoid the debt as it helps to find the shortcoming and adjust according from excess funds. This
helps to track the all cash habits and allocate the funds according in order to operate business
efficaciously. Moreover, it increases the efficiencies and financial resources of organisation
which increases profitability. It enhance the financial position of company. By using this
organisation can avoid the debt by preparing cash budget and it helps to make correct budget. It
also require attention to detail, tracking specific habits by managing cash in organisation.
Disadvantages – It can create danger or theft for organisation in case of not tracking the
cash flows properly. Tracking of cash is difficult for organisation that can be threat for Rolls
Royce Motor Cars Ltd to arrange the cash resources properly. Moreover, it can limits the

spending power of business industry resulting low productivity (Smith, 2015). It can reduce the
cash within organisation in case of improper records.
Master budget – This is the covering of all lower budget which is produced by business
organisation in to various functional areas. It covers financial statements, financial plan and cash
forecast in order to set organisational goals. This budget is presented on the basis of monthly,
quarterly and yearly which covers Rolls Royce Motor Cars Ltd's entire fiscal year. In other
words, it is a planning tool which is used by management team to direct the business activities
and judge the business performance at various responsibility centres. This is a superior budgets
which is prepared by involving all small budgets.
Advantages – Through master budget management of Rolls Royce Motor Cars Ltd can
identified the goals and objectives. It involves all financial and non financial information that
helps to take right action. This helps managers to get information regarding earning and
expenditure which leads to achievement of goals and objectives. By applying this budget
respective company can arrange the funds if they are going excess beyond budget and adjust
with other one where is needed which helps to make profits.
Disadvantages – Master budget is difficult to read for manager because it covers whole
information which is related to organisation. So, Rolls Royce Motor Cars Ltd can not make right
decision on specified time due to involving many transaction and informations. Moreover, it also
difficult to update periodically (Phang, Siti-Nabiha and Jalaludin, 2019).
Operating budget – A financial plan is consider as operating budget which is prepared
by all organisation in order to meet with company's debt and operating business successfully.
This budget covers all daily basis transaction that sustain the growth over specified time period.
By creating this Rolls Royce Motor Cars Ltd can allows management to know where company is
spending money and at what areas it needs cash most. By using this budget management of
respective company operate its business on daily basis that helps to increase the profitability.
Advantages – It helps Rolls Royce Motor Cars Ltd to allocate money in short term and
long term as well as for future activities that helps to attain the business goals efficaciously. It
also helps to keep records of tax complications by determining the operations and accurate
informations. This budget states the problems and plan in order to operate business and earning
profits. Moreover, operational activities are perform effectively which helps to maintain the
organisational productivity.
cash within organisation in case of improper records.
Master budget – This is the covering of all lower budget which is produced by business
organisation in to various functional areas. It covers financial statements, financial plan and cash
forecast in order to set organisational goals. This budget is presented on the basis of monthly,
quarterly and yearly which covers Rolls Royce Motor Cars Ltd's entire fiscal year. In other
words, it is a planning tool which is used by management team to direct the business activities
and judge the business performance at various responsibility centres. This is a superior budgets
which is prepared by involving all small budgets.
Advantages – Through master budget management of Rolls Royce Motor Cars Ltd can
identified the goals and objectives. It involves all financial and non financial information that
helps to take right action. This helps managers to get information regarding earning and
expenditure which leads to achievement of goals and objectives. By applying this budget
respective company can arrange the funds if they are going excess beyond budget and adjust
with other one where is needed which helps to make profits.
Disadvantages – Master budget is difficult to read for manager because it covers whole
information which is related to organisation. So, Rolls Royce Motor Cars Ltd can not make right
decision on specified time due to involving many transaction and informations. Moreover, it also
difficult to update periodically (Phang, Siti-Nabiha and Jalaludin, 2019).
Operating budget – A financial plan is consider as operating budget which is prepared
by all organisation in order to meet with company's debt and operating business successfully.
This budget covers all daily basis transaction that sustain the growth over specified time period.
By creating this Rolls Royce Motor Cars Ltd can allows management to know where company is
spending money and at what areas it needs cash most. By using this budget management of
respective company operate its business on daily basis that helps to increase the profitability.
Advantages – It helps Rolls Royce Motor Cars Ltd to allocate money in short term and
long term as well as for future activities that helps to attain the business goals efficaciously. It
also helps to keep records of tax complications by determining the operations and accurate
informations. This budget states the problems and plan in order to operate business and earning
profits. Moreover, operational activities are perform effectively which helps to maintain the
organisational productivity.
⊘ This is a preview!⊘
Do you want full access?
Subscribe today to unlock all pages.

Trusted by 1+ million students worldwide
1 out of 23
Related Documents

Your All-in-One AI-Powered Toolkit for Academic Success.
+13062052269
info@desklib.com
Available 24*7 on WhatsApp / Email
Unlock your academic potential
Copyright © 2020–2025 A2Z Services. All Rights Reserved. Developed and managed by ZUCOL.