You were recently hired as management director of the nevw I Can Business Incorp
ID: 2618916 • Letter: Y
Question
You were recently hired as management director of the nevw 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 4-5-page 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. * Explain the budget cycle and proces:s. 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 o Give an example of budget guidelines that ICBI should follow in order to successfully plan. * o Identify and describe at least 5 basic budget guidelines.Explanation / Answer
Answer A) FInancial reporting is a system to compile all data pertaining to finance and fund and present the same in meaning full manner .The report can be created for many purposes as by use of principles of financial accounting , cost accounting and management accounting. The major components of financial reporting are
Answer B) The budget cycle is very common to budgeting agencies to form transparent and effective budgeting processes, adopted as per need of business. The budget cycle is used to promote responsibility and accountability , and financial projections. The well defined defined segments in the budget cycle encourage a perfect process that mainly allows for input and sometimes revision.The budget cycle generally starts in advance of the company’s accounting period and ends after end of the period.There are mainly four segments in budget
Answer 3) Activity Based Budgeting (ABB) is modern approach of budgeting designed to give greater transparency in complete the budgeting process. ABB is suitable for activities involve to generate revenues generated from instructional and research activities allocated directly. ABB provides better local planning and accountability for efficient management of resources and expenditures.
Activity based budget
Operating Budget
Similarity
Differences
Answer 5) As ICBI is a start up firm , some basic guidelines are
Activity based budget
Operating Budget
Similarity
- Created for a specific time period
- For control of revenue and expanses
- Forecasting and future detail
- Created for a specific time period
- For control of revenue and expanses
- Forecasting and future detail
Differences
- This is the modern style of budget
- Based on current activity level
- Increase as per expected growth
- This is the traditional style of budget
- Based on the past data of revenue ,expanses
- Increase from last year as per trend
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