Page 113 - BA2 Integrated Workbook STUDENT 2018

Budgeting

Approaches to budgeting

5.1 Rolling and periodic budgets

The CIMA Terminology defines a rolling budget as a ‘budget
continuously updated by adding a further accounting period (month
or quarter) when the earliest accounting period has expired. Its use is
particularly beneficial where future costs and/or activities cannot be
forecast accurately.'

For example, a budget may initially be prepared for January to December. At the end
of the first quarter, that is, at the end of March, year 1, the first quarter’s budget is
deleted. A further quarter is then added to the end of the remaining budget, for
January to March, year 2. The remaining portion of the original budget is updated to
reflect current conditions. This means that managers have a full year’s budget always
available and the rolling process forces them continually to plan ahead.

A system of rolling budgets is also known as continuous budgeting.

Advantages Disadvantages

 More accurate  More time and

effort
 Up to date

 Continually
 Always 9–12 budgeting

months ahead
 No fixed budget
to compare
against

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