Question

GAAP require state and local governments to include in their annual financial reports a budget-to-actual comparison showing actual results and original and final appropriated budgets. What are the advantages of requiring both the original and final appropriated budget amounts?

Answer 1

Answer:

The advantages of requiring both the original and final appropriated budget amounts are:

1. It enables comparison of original (static) budget with the final (flexible) budget.

2. From the comparison, management assesses performances based on actual performance versus original and final budgets respectively.

3. The significant changes based on the level of activity are easily determined.

Explanation:

The use of original and final budgets helps in the comparison with actual performance.  It clearly shows the effect of the level of activity on budget performance.