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Rolling Budget:
A rolling budget is continually updated to add a new budget period as the most recent budget period is completed. Thus, the rolling budget involves the incremental extension of the existing budget model. By doing so, a business always has a budget that extends one year into the future.
Increment Budgeting:
Incremental budgeting is budgeting based on slight changes from the preceding period's budgeted results or actual results. This is a common approach in businesses where management does not intend to spend a great deal of time formulating budgets, or where it does not perceive any great need to conduct a thorough re-evaluation of the business. This mindset typically occurs when there is not a great deal of competition in an industry, so that profits tend to be perpetuated from year to year.
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The preparation of budgets on an annual basis has been strongly criticized on the grounds that it is too rigid and ties a company to a twelve month commitment, which can be risk because the budget is based on an uncertain forecasts. An alternative is for the annual budget to be broken down by months for the first three months and by quarters for remaining nine months. The quarterly budgets are then developed on a monthly basis as the year proceeds. for example during the budget for the next three quarters may be changed as new information becomes available. A new budget for a fifth quarter will also be prepared. This process is known as continuous or rolling budgeting and ensures that a twelve month budget is always available by adding a quarter in the future as the quarter just ended is dropped.
With incremental budgeting indirect cost and support activities are prepared on an incremental basis. This simply means the existing operations and the current budgeted allowance for existing activities are taken as the starting point for preparing the next annual budget. The base is then adjusted for changes which are expected to occur during the new budget period. when this approach is adopted the concern is mainly with the increment in operations or expenditure that will occur during the forthcoming budget period. The major disadvantage of the incremental approach is that the majority of expenditure, which is associated with the base level of activity, remains unchanged. As such past inefficiencies and waste inherent in the current way of doing things are perpetuated.
Great answer sir Frank, had zero knowledge of Rolling Budget. Thanks for Update.
full agree with mr. tamer on his answer
Rolling Budget is to always to have an overview / extended budget to the next period. Just to keep up planning and budgeting for the next period. Mostly months, and when first period end (January for example, so we should establish one more month at the end of our plan to still be the months . Incremental budgeting is very essential here.
Incremental budget is to bring the recent budget and to start to add / deduct some values to get the current budget.
I Agree with Mr, Tamer ..............
agree with mr mohamed wessam akram
Answer added by: frank mwansa ACCOUNTING LECTURER is the CORRECT answer.
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