Analysis of Budgeting, Financial Statement Users & Importance

This report provides a comprehensive overview of budgeting and its significance in organizations. It identifies and discusses the key users of financial statements, including management, shareholders, financiers, employees, suppliers, governments, and rating agencies, highlighting their respective interests and uses of financial information. The report also examines the importance of budgeting in financial monitoring, resource allocation, and controlling monetary sources, as well as its limitations, such as inaccuracies, rigidity in decision-making, time consumption, and potential for conflicts. The report references academic sources to support its analysis, offering a detailed understanding of budgeting practices and financial statement utilization within a business context. Desklib provides this document as a study resource, offering students access to a wealth of past papers and solved assignments.

BUDGETING

Table of Contents
INTRODUCTION...........................................................................................................................4
MAIN BODY...................................................................................................................................4
Question 1....................................................................................................................................4
Question 2....................................................................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Budgeting is defined as an anticipation related to the revenue and expenses for a specific
future time frame. This entire project will discuss the different areas of budgeting. Henceforth,
project will emphasis over the seven key users of the financial statements prepare by the
organisation. Furthermore, importance of budgeting will also discuss in this project. Limitations
related to budgeting system will also discuss in this project.
MAIN BODY
Question 1
Users are the reader of the financial statement that tend to use the information projected
by the financial records. Following are the list of key reader or user of the financial statement
that will allow to the organisation to channelise the use of these statements.
Management
Management of the organisation always focus over utilising to the information depicted
in the financial records. Management and board of directors make all decision in the business
with the use of the financial statement (Bardovič and Gašparík, 2021). Almost every decision
management of the company make is after analysing and interpreting to the information depicted
in the financial statements and records of company. Along with taking the decision management
of the company also use the financial statement to assess the results company could derive out of
the business decision making.
Shareholders
Shareholders of company also take a use of the financial statement in order to make a
decision related to investing in business. Shareholders of company analysis the financial records
and statement in order to undertake the best suitable investment decision in the business
(Prayoga and Afrizal, 2021). Shareholder carry the strong interest in the performance of the
company. Financial statement clearly reflect how effectively the business could perform in
respective target market.

Financiers
Financiers are the stakeholders who provide funds to the organisation for carrying out
business activity. Finances assess the position of the organisation by using the financial records
and then they make decision related to financing the business. Financial statement depict about
the liquidity, efficiency, profitability of the business which allow the finances to grant funds to
business if the organisation hold the strong financial position. Financiers are the key stakeholder
of the business.
Employees
Employees are also the one that tend to use the financial information. Every employee
hold the long term interest in the growth of the organisation as it will also affect to the
sustainability of human resource in such an organisation. Employee use the financial statement
so that financial positron of business can monitor by the firm.
Suppliers
Suppliers are the one who supply the material and products to the organisation for
considering to the different needs and requirements of business. Suppliers utilise the financial
statement in order to grant credit to the organisation (Salijeni, Samsonova-Taddei and Turley,
2021). Only if the organisation hold a smooth liquidity suppliers will allow the credit to the
organisation.
Governments
Government also look at the financial statement of the firm in order to analysis whether
the company is presenting the right facts and records in the income tax return. This stakeholder is
also among the key user of the financial statement produce by the firm.
Ratting agencies
Ratting agencies involved in providing the ratting to the firm. They also assess the
financial statement to provide the suitable ratting based on the organisation and its performance.
Ratting can be associated with any aspect such as performance, growth, products and any other
context. Financial ratting allow the company to polish its brand image in respective target
market.
Question 2
( A )
Importance of budgeting

Budgeting allow the company to sustain the financial effectiveness of all operations
perform by the firm. Budgeting is a tool use to analysis the financial requirements of the firm
that are fulfilled with the use of this technique. With the use of budgeting practice company and
its management allocate suitable finances to all different operations and functional areas of the
organisation. Financial monitoring is also done with the use of budgeting. Every year company
analysis what are the key areas that will seek funds of company and in budgeting company and
financial expert only include such areas that potentially require funds. Controlling monetary
source of firm is one of the core advantage and benefit associated with the budgeting (Talha,
2021). Setting up priorities is also a key advantage budgeting practice allocate to the firm or
organisation. Unhealthy expenses are avoided with the use of budgeting practice in the
organisation. With the support of budgeting financial viability and liquidity of the firm also get
improved. The organisation get to cherish the liquidity and financial efficiency of the
organisation. Budgeting allow the company to manage its utilities that will further tend to
improve or increase the profitability of the organisation in respective garget market.
( B )
Limitations of budgeting
Budgeting is a practice hold certain limitations as well along with the core advantage of
this practice. Many times inaccuracy is found in budgeting. The expected expenses and financial
requirements and actual need of the firm do not match in most of the situations. This completely
restrict the efficiency of this practice. Many times not having a proper anticipation about the
expenses in budgeting liquidity related issues also face by the organisation. Budgeting only
consider the financial terms and factors (Valdiansyah and Augustine, 2021). Non financial terms
and factors are not considered in the budgeting process which create a huge limitation of this
practice. Due to the budgeting decision-making in business also become rigid. This entire
practice is time-consuming by nature as it take a time to prepare a budget. Also, it is not certain
that budgeting will provide an accurate results and finding which is a key limitation belong to
this technique. Many times due to budgeting conflicts arises in the organisation as well.
CONCLUSION
There are a certain number of stakeholders who contain the use of financial information
these include management, employee, lender, shareholders and many others. All these

stakeholder carry different types of use but they tend to read the financial statement. Budgeting
all the organisation to anticipate the future requirement and make an adjustment according to it.

REFERENCES
Books and Journal
Bardovič, J. and Gašparík, J., 2021. Enablers of participatory budgeting in Slovakia during the
COVID-19 pandemic. Scientific Papers of the University of Pardubice. Series D.
Faculty of Economics and Administration, 29(1).
Prayoga, I. and Afrizal, T., 2021. Perceptions of Educators, Accounting Students and
Accountants Public Accountant against Ethics of Financial Statement Preparation
(Studies at University and KAP in Semarang). Budapest International Research and
Critics Institute-Journal (BIRCI-Journal). pp.89-101.
Salijeni, G., Samsonova-Taddei, A. and Turley, S., 2021. Understanding how big data
technologies reconfigure the nature and organization of financial statement audits: A
sociomaterial analysis. European Accounting Review. 30(3). pp.531-555.
Talha, M., 2021. FINANCIAL STATEMENT ANALYSIS OF ATLAS HONDA MOTORS,
INDUS MOTORS AND PAK SUZUKI MOTORS (EVIDENCE FROM
PAKISTAN). Ilkogretim Online. 20(4).
Valdiansyah, R. H. and Augustine, Y., 2021. Modelling of beyond budgeting, competitor
accounting, transparency, competitive advantage, and organizational performance: The
case of Indonesia SMEs. Technium Soc. Sci. J., 22, p.334.