Difference Between Fixed Budget And Flexible Budget Pdf

difference between fixed budget and flexible budget pdf

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Everything you need to know about the types of budgets. Budget is a financial statement that provides detailed information about the revenue and expenditure of a particular year.

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Why a Flexible Budget May Be a Good Option for Your Business

Flexible budget can be suitably recasted quickly according to level of activity attained. Fixed budget assumes that conditions would remain static. Flexible budget is design to change according to changed conditions. Costs are not classified according to their variability i. Coasts are classified according to the nature of their variability. Comparison of actual and budgeted performance cannot be done correctly if the volume of output differs.

A fixed budget is a financial plan that is not modified for variations in actual activity. Since most companies experience substantial variations from their expected activity levels over the period encompassed by a budget, the amounts in the budget are likely to diverge from actual results. This divergence is likely to increase over time. The only situations in which a fixed budget is likely to track close to actual results are when:. Costs are largely fixed , so that expenses do not change as revenues fluctuate.

Post a Comment. Following are the main differences between static and flexible budget: 1. Nature A static budget does not change with the actual volume of the output achieved. A flexible budget is designed to change appropriately with the level of activity attained. Scope A static budget cannot ascertain costs correctly in case of any change in circumstances. Flexible budget can easily ascertain costs in different levels of activities.

Difference between Fixed Budget and Flexible Budget

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The budget can be understood as a quantitative plan that acts as an estimate of future operation. Based on the Capacity, there are two types of budgets prepared in cost accounting, namely, fixed budget and flexible budget. Fixed Budget is a budget that remains constant, irrespective of the levels of activity, i. On the contrary,. Flexible Budget can be understood as the budget created for different production levels or capacity utilization, i. While fixed budget operates in only production level and under only one set of condition, flexible budget comprises of several budgets and works in different conditions.

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While fixed budget operates in only production level and under only one set of condition, flexible budget comprises of several budgets and works.


Types of Budget in Accounting

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What is the key difference between a static budget and a flexible budget?

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David H.

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The following are the main difference between fixed and flexible budget. Detailed Infographics and comparision table for Fixed vs Flexible Budget.

Merci M.

REPLY

A budget that does not take into account any circumstances resulting in the actual levels of activity achieved being different from those on which the original budget was based.

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