ACCA Applied Skills · Performance Management · Budgetary systems and types of budget
A company prepares a budget for the next twelve months. At the end of each quarter, the quarter just ended is dropped and a new quarter is added so that a full twelve-month budget is always available. Which type of budget is this?
This is a rolling budget, also called a continuous budget. After each quarter ends, that quarter is removed and a new one added, so the business always has a twelve-month forward plan. A fixed budget would not be revised, and flexing relates to activity levels.
- ARolling budgetCorrect
- BFixed budget
- CZero-based budget
- DFlexible budget
Explanation
A rolling (continuous) budget is updated regularly by removing the expired period and adding a new one, keeping a constant planning horizon. A fixed budget is not changed once set. Zero-based budgeting starts from zero rather than being updated by period. A flexible budget adjusts for activity level.
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