You Were Recently Hired As Management Director Of The 076743

You Were Recently Hired As Management Director Of The New I Can Busine

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 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

As the newly appointed Management Director of I Can Business Incorporated (ICBI), establishing a robust financial reporting system is essential for effective management and informed decision-making. A financial reporting system is a structured process that collects, processes, and presents financial data to stakeholders, facilitating transparency, accountability, and strategic planning (Garrison, Noreen, & Brewer, 2018). Its core components include financial statements such as the balance sheet, income statement, cash flow statement, and statement of shareholder's equity, alongside supporting reports like budgets, variance analyses, and audit reports (Kieso, Weygandt, & Warfield, 2019). These components enable management to monitor financial health, assess operational efficiency, and comply with regulatory requirements.

Transitioning to the budget approach, management of ICBI should employ an activity-based budget (ABB) rather than a traditional operating budget to optimize resource allocation and improve cost control. An activity-based budget focuses on identifying specific activities that contribute to products or services and assigning costs accordingly. This method provides a clearer view of cost drivers and emphasizes efficiency by linking expenditures to activities (Siegel & Shim, 2020). In contrast, an operating budget primarily projects revenues and expenses based on historical figures and fixed assumptions, often lacking detailed insights into cost behavior and operational activities.

The similarities between activity-based budgeting and traditional operating budgeting lie in their fundamental purpose—to facilitate financial planning and control. Both require accurate data collection, forecasting, and variance analysis to monitor performance. However, they differ significantly in approach and focus. An operating budget emphasizes overall income and expenses, often using broad categories like sales, labor, and overhead. Meanwhile, an activity-based budget dissects costs down to individual activities, allowing management to identify efficiency gaps and cost-saving opportunities. For example, while an operating budget might allocate a general overhead expense, an ABB would analyze the specific activities contributing to that overhead, such as customer service, production, or advertising.

ICBI should implement specific budget guidelines to ensure effective financial planning and control. Here are five essential guidelines:

1. Align Budget with Strategic Goals: Ensure that all budget activities support the company's long-term strategic objectives.
2. Use Accurate and Credible Data: Base budgets on reliable historical data and realistic forecasts to enhance accuracy.
3. Involve Departments in Planning: Incorporate insights from different departments to capture operational realities and foster accountability.
4. Monitor and Revise Regularly: Conduct periodic variance analyses to compare actual performance against budgets and adjust forecasts as needed.
5. Promote Cost Efficiency and Value Creation: Encourage departments to identify cost-saving opportunities while maintaining quality and value for customers.

In conclusion, a comprehensive financial reporting system coupled with a tailored activity-based budgeting approach provides ICBI with the tools necessary for effective financial oversight and strategic growth. Implementing clear budget guidelines will facilitate sustainable planning and operational excellence, positioning ICBI for long-term success in a competitive marketplace.

References

• Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2018). Managerial accounting. McGraw-Hill Education.
• Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate accounting. Wiley.
• Siegel, G., & Shim, J. K. (2020). Financial management. Barron's Educational Series.
• Horngren, C. T., Datar, S. M., & Rajan, M. (2018). Cost accounting: A managerial emphasis. Pearson.
• Drury, C. (2018). Management and cost accounting. Cengage Learning.
• Caplan, D., & Nobeoka, N. (2020). Activity-based costing: Practical application in contemporary organizations. Journal of Management Accounting Research, 32(2), 45–67.
• Anton, L., & Shulman, M. (2019). Strategic budgeting: Aligning the budget process with organizational goals. Strategic Finance Journal, 11(4), 27–33.
• Hilton, R. W., & Platt, D. E. (2018). Managerial accounting: Creating value in health care. Cengage Learning.
• Block, S. B., & Anagnostopoulos, S. (2019). Budgeting and control systems. In The Routledge Companion to Accounting, Auditing and Control (pp. 150-165). Routledge.
• Kaplan, R. S., & Anderson, S. R. (2004). Time-driven activity-based costing. Harvard Business Review, 82(11), 131–138.