1. (a) Budgeting is the process of preparing detailed financial plans for a future period, involving estimating revenues, expenses, cash flows, and resources to achieve business goals. It serves as a tool for planning, control, and performance evaluation in organizations.

Two objectives of budgeting:

1. Planning and Coordination: Budgeting helps in setting financial targets and coordinating activities across departments to align with strategic goals. For example, in a Ghanaian bank like Stanbic Bank Ghana, budgeting ensures alignment with BoG’s liquidity guidelines for efficient resource allocation.
2. Performance Measurement and Control: It provides a benchmark to compare actual results against planned, enabling variance analysis and corrective actions. Post the 2017 banking cleanup, budgeting helped banks like Ecobank Ghana monitor costs to maintain profitability and compliance.

(b) Five external users of financial statements and their information needs:

1. Investors: They use financial statements to assess profitability and risk for investment decisions. In Ghana, investors in bank shares need ratio analysis (e.g., return on equity) to evaluate post-DDEP recovery potential.
2. Creditors and Lenders: They evaluate the business’s ability to repay loans through liquidity and gearing ratios. BoG, as a regulator, uses statements to ensure banks meet capital requirements under Act 930.
3. Government and Regulatory Bodies: Agencies like the Ghana Revenue Authority use statements for tax assessment, while BoG reviews for compliance with directives like the Cyber Security Directive 2020.
4. Suppliers: They check creditworthiness via current ratios to decide credit terms. In banking supply chains, suppliers to banks like Access Bank Ghana assess solvency to mitigate risk.
5. Customers: They gauge the business’s stability for long-term relationships. Bank customers in Ghana review statements to ensure bank resilience, especially after collapses like UT Bank due to governance issues.

(c) The objective of general-purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders, and other creditors in making decisions about providing resources to the entity, as per IAS 1. In Ghana, this supports transparent reporting for stakeholder confidence in the banking sector.

(d) The objective of financial statements is to present a true and fair view of the entity’s financial position, performance, and cash flows for a period, enabling users to assess stewardship and make economic decisions. Under IFRS adopted in Ghana, this ensures compliance and reliability for BoG oversight.