Xavi Posted APA Format Reflections On Original Work

Xavi Postedapa Format 3 4 Ref Fresh Original Work 15 You We

You were recently hired as management director of the new I Can Business Incorporated (ICBI). You have been asked to establish policies and systems for the business. The first one you choose to work on is a financial reporting system. For this assignment, you must develop a memo that you will deliver to the board of directors of ICBI. You will describe what a financial reporting system is and explain how management of ICBI should use an activity-based budget instead of an operating budget.

Be sure to explain the similarities and the differences of the two. Finally, give examples of budget guidelines for ICBI. You must answer the following questions: Describe the meaning and the components of a financial reporting system. Write a description of how management should use an activity-based budget instead of an operating budget. Explain the similarities and differences of the two budgets. Give an example of budget guidelines that ICBI should follow in order to successfully plan. Identify and describe at least five (5) basic budget guidelines.

Remember to use the library or other credible resources to support your argument. Be sure to cite your sources using the correct standard of APA.

Paper For Above instruction

To the Board of Directors of I Can Business Incorporated (ICBI),

As the newly appointed management director, it is essential to establish a comprehensive financial reporting system that ensures accurate, timely, and meaningful financial information for decision-making. This memo aims to explain what a financial reporting system entails, the advantages of implementing an activity-based budget (ABB) over an operating budget, and the guiding principles for effective budgeting within our organization.

Understanding the Financial Reporting System

A financial reporting system encompasses organized processes and procedures that collect, measure, analyze, and communicate financial information about an organization. Its components include financial statements (income statement, balance sheet, cash flow statement), transaction records, accruals, and relevant financial metrics that assist stakeholders in evaluating the financial health and performance of the business. Additionally, the system involves internal controls and audit mechanisms to ensure data accuracy and compliance with accounting standards.

An effective financial reporting system provides insights into revenue generation, expense management, asset utilization, and capital structure. This system supports strategic planning, regulatory compliance, investor relations, and operational efficiency. For ICBI, establishing such a system will ensure transparency, accountability, and informed managerial decision-making.

Adopting an Activity-Based Budget (ABB) Instead of an Operating Budget

Management should adopt an activity-based budget (ABB) as it offers a more detailed and precise understanding of costs incurred by specific activities, products, or services. Unlike traditional operating budgets that focus primarily on broad revenue and expenditure forecasts, ABB allocates costs based on activities that drive expenses, such as production, marketing, or administrative tasks. This approach enables managers to identify cost drivers, evaluate efficiency, and make more strategic resource allocations.

Implementing an ABB involves analyzing each activity essential to business operations, determining the cost associated with each activity, and then assigning these costs to products or services based on their consumption of these activities. This granularity enhances decision-making, allowing managers to identify areas where efficiency can be improved or costs can be reduced.

Similarities and Differences Between the Two Budgets

The primary similarity between an activity-based budget and an operating budget is that both serve as financial planning tools designed to forecast revenues and expenses, facilitating organizational strategic goals. They both require data collection, cost analysis, and ongoing monitoring to ensure accuracy and relevance.

However, their fundamental differences lie in scope and focus. An operating budget tends to emphasize overall revenues and expenses, providing a broad overview of financial performance without detailed cost analysis based on activities. Conversely, an activity-based budget provides a detailed attribution of costs to specific activities, offering finer insights into what drives costs and how they relate to organizational outputs.

While the operating budget may suffice for general financial oversight, ABB is particularly useful for internal management and process improvement, leading to better cost control and profitability analysis.

Budget Guidelines for ICBI

To successfully implement effective budgeting practices, ICBI should adhere to the following five basic budget guidelines:

1. Align Budgets with Strategic Goals: Ensure that all budgets support the organization’s short-term and long-term objectives, providing a direct link between planning and strategic vision.
2. Maintain Realistic and Achievable Targets: Set practical and attainable financial goals based on historical data, market trends, and organizational capacity to foster motivation and accountability.
3. Involve Departmental Input: Engage relevant departments in the budgeting process to incorporate on-the-ground insights and improve accuracy.
4. Implement Regular Monitoring and Review: Establish periodic review meetings to compare actuals against budgets, identify variances, and make necessary adjustments promptly.
5. Promote Flexibility and Continuous Improvement: Allow room for adjustments in response to unforeseen circumstances, fostering a culture of continuous financial improvement and adaptability.

By following these guidelines, ICBI can develop a robust budgeting system that facilitates effective resource allocation, enhances financial transparency, and drives organizational success.

Conclusion

In conclusion, establishing a solid financial reporting system complemented by an activity-based budget will provide ICBI with the tools necessary for precise financial management and strategic planning. Adopting detailed budgeting methods like ABB allows for granular insight into costs, fostering efficiency and profitability. Simultaneously, adherence to fundamental budgeting principles will ensure the organization maintains financial discipline and flexibility needed for sustainable growth.

References

• Drury, C. (2018). Management and Cost Accounting (10th ed.). Cengage Learning.
• Horngren, C. T., Sundem, G. L., Stratton, W. O., & Burgstahler, D. (2018). Introduction to Management Accounting. Pearson.
• Kaplan, R. S., & Cooper, R. (1998). Cost & Effect: Using Integrated Cost Systems to Drive Profitability and Strategic Alignment. Harvard Business School Press.
• Langfield-Smith, K., Thorne, H., & Hilton, R. W. (2018). Management Accounting: Information for Creating and Managing Value. McGraw-Hill Education.
• Horváth, P., & Paloviita, J. (2015). State of the Art in Activity-Based Costing and Management. Journal of Management Control, 26(2), 137-163.
• Anthony, R. N., & Govindarajan, V. (2014). Management Control Systems (13th ed.). McGraw-Hill Education.
• Wilkinson, T. J., & Baggs, D. (2015). Management Accounting (7th ed.). Wiley.
• Anthony, R. N., & Govindarajan, V. (2007). Fundamentals of Management Accounting. McGraw-Hill.
• Accenture. (2020). Enhancing Financial Reporting with Activity-Based Costing. ACCA Reports. https://www.accaglobal.com
• American Institute of Certified Public Accountants (AICPA). (2019). Financial Accounting and Reporting. AICPA.org.