Describe the meaning and the components of a financial reporting system.

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.

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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 process.
• 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.

Sample Answer

Introduction

Financial reporting is the process of producing statements that disclose an organization’s financial status to management, investors and the government. In the United States, the four basic reports are balance sheets, income statements (also referred to as profit and loss statements), cash flow statements and statements of shareholders’ equity.A financial report should answer certain basic financial questions: Is the business making a profit or suffering a loss, and how much? How do assets stack up against liabilities? Where did the business get its capital, and is it making good use of the money? What’s the cash flow from the profit or loss for the period? Did the business reinvest all its profit? Does the business have enough capital for future growth?