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Fixed Budgeting
The master budget discussed before is a fixed budget.
A fixed budget is defined via as:
1. Just one level of activity
2. Not adjusted to reflect real activity level when change happens
A fixed budget has the given limitations as:
1. It gives little assistance at the planning stage. It does not provide implication of different alternative strategies that management may wish to consider.
2. It fails to give relevant and reliable base against that to measure real performance where real activity differs from the budget.
3. Little motivation to management to employ the budgeting control system like a control aid.
WORKED EXAMPLES OF EXPECTED CASH COLLECTIONS PATTERNS
entries to be entered into a ledger account for the month of July 2009 & prepare an incoem statement. balances at 1/7/2009 Materials control $6150 Labour control (accrued wages)
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