State true or false and justify your answer:

The actual budget may be in deficit while the standardized budget is in surplus.

• The above statement is true.

A standardized budget refers to a type of budget the attempts to remove the impact of cyclic economic movements. Actual budget relates to a type of budget, which tries to explain the actual financial plan. This type of budget considers cyclic economic movements. Budget surplus refers to a situation where the revenue of an entity is more than its expected expenses. A budget deficit is where expenses are more than the revenue generated.

The actual budget may indeed be in a deficit, but the standardized budget is in surplus. This is because the actual budget considers the cyclic economic movement, but the standardized budget does not consider the cyclic economic movement. The cyclic economic movement can increase expenses, but the effect is felt in the actual budget only.