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ACCA Applied Knowledge · Management Accounting · Nature and purpose of budgeting

A company prepares a rolling budget covering four quarters. At the end of each quarter, the quarter just completed is removed and a new quarter is added. Which of the following is a recognised advantage of this approach?

The recognised advantage is that a rolling budget stays current and always looks a full year ahead, because a new quarter is added as each one expires. It does not cut preparation costs, remove variance comparison, or ensure that managers accept the targets.

  1. AIt reduces the time and cost of budget preparation
  2. BIt keeps the budget up to date and always looks a full year aheadCorrect
  3. CIt removes the need to compare actual results with the budget
  4. DIt guarantees managers will accept the targets set

Explanation

Rolling budgets are revised regularly, so they reflect current conditions and give a constant planning horizon. They normally increase, not reduce, the preparation effort and cost. They do not remove variance reporting or guarantee acceptance by managers.

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