Write a 3 page essay on Budgting ip3.Finally, this memo will identify the guidelines for a budget that ICBI should adopt.A financial reporting system can be defined as the provision of information rel
Write a 3 page essay on Budgting ip3.
Finally, this memo will identify the guidelines for a budget that ICBI should adopt.
A financial reporting system can be defined as the provision of information relating to the financial performance of the organization, and the usage of an organization financial resource. Financial reporting promotes accountability,
which is an important factor that determines the success or failure of a business organization (Heath, 2012). In providing this information, financial reporting gives a summary of a detailed financial data, and it then presents this summarized information in a manner in which people with no accounting experience can understand.
One major component of financial reporting system is the availability of information. It is this information that the financial reporters will use to develop budgets, analyze and forecast the flow of the organizations cash, create a dashboard report, identify the key financial indicators, and also provide financial restatements. All these are components of financial reporting. One of the recommended financial reporting systems for the organization to use is the budget (Shim and Siegel, 2012).
There are two main types of budgeting, namely activity based budgeting and operating budgeting. The recommended type of budget to use is the activity based budgeting. This is a type of budgeting whereby the activities which incur costs at various functional areas of the organization are written down, and there relationships are thereafter analyzed and defined (Sharma, 2010). Budgeters will then tie these activities to strategic goals of the organization. The costs that the organization incurs in running these activities are then used for purposes of developing a budget.
On this note, by considering the cost structure of a given organization, through the various activities that the organization performs, financial analysts can analyze the potential of the organizations services and products to achieve