The difference between a static budget and a flexible budget is that a static budget is prepared based on a single level of activity, whereas a flexible budget is prepared based on multiple levels of activity 3. A static budget is useful when the level of activity is constant, whereas a flexible budget is useful when the level of activity varies. A flexible budget is more accurate than a static budget because it takes into account the changes in the level of activity 3. The importance of reading and correctly interpreting budgeted financial statements is that it helps the management in making informed decisions about the future of the entity. It also helps the management in identifying the areas of