A company prepares its budget every month by adding a new month and dropping the month just completed, so that a twelve-month budget is always available. What is this called?
Answer and explanation
Correct answer: B. A rolling budget
- Step 1: A rolling (continuous) budget is updated regularly by adding a future period as each period ends.
- Step 2: The other three differ in how the figures are built.
Answer
A rolling budget.
Why not the others: A zero-based budget: Zero-based budgeting starts from nothing and requires each activity to be justified. An incremental budget: Incremental budgeting takes last year's figures and adds a percentage. A flexible budget: A flexible budget changes with activity levels, not with the passage of time.
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