Inflation

• The typical line item budget has fixed dollar amounts dedicated to each of the noted items. These dollar amounts do not change to account for rising costs within the budget year. Travel expenses, for instance, are subject to change with the cost of fuel. A company has to cut the number of trips the sales or public relations department will make when travel costs go up and the travel budget does not make fluctuations.
  
  

Inertia

• Most governments and corporations make very few changes in traditional budgets from year to year. Managers learn to operate within the constrictions of incremental budgets, which only allow spending for specific items. Managers cannot make any changes in departmental operations when the budget does not permit spending for anything different. Many departments and companies remain complacent with managers spending the budgeted funds on the same items year after year, despite changing departmental needs.
  
  

Accountability

• The traditional budgeting method dictates how much money is available for specified items. These budgets do not specify results for the spending. A manager in charge of the funds on a line item basis will only have to produce receipts and payroll records to account for the expenditures. Newer budgeting methods allocate funds for the completion of specific tasks. Managers must meet a budget objective in order to account for spending with such methods.
  
  

Funding Transfer

• The line item system shows how much money is available for specified items. Managers often find ways to cut spending on certain items, which leads to a surplus in the budget for those expenses. That surplus is not transferable to fund the purchase of any other item whether it is within the budget or not. Department managers cannot balance their own budgets by saving money on some items in order to spend more on others.