Skip to content

ACCA Strategic Professional · Advanced Performance Management · Budgetary planning and control

Calder Retail's finance director criticises the annual fixed budget because it is set months ahead and is rarely revisited, even when market conditions change sharply. Which approach would most directly address this weakness by adding a new forecast period as each period ends, so that the planning horizon is always the same length?

A rolling budget is the best answer. It is updated regularly, with a new period added as each one expires, so the planning horizon remains constant and the budget reflects current conditions, unlike a fixed annual budget set months earlier.

  1. AZero-based budgeting
  2. BRolling budgetCorrect
  3. CIncremental budgeting
  4. DFlexed budget

Explanation

A rolling budget is updated regularly, adding a new period as the one just ended is dropped, so the horizon stays constant (for example 12 months). Zero-based budgeting rebuilds activities from nothing but does not maintain a constant horizon. Incremental budgeting simply adds an adjustment to last year's figures, and flexing only adjusts for actual activity levels.

Did you get it right without looking?

One question tells you little. A timed set on Budgetary planning and control shows your real accuracy, how long you take and where you lose marks.

Practise Budgetary planning and controlFree diagnostic mock

More Budgetary planning and control questions