ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -1. Incremental budgeting. Incremental budgeting takes last year’s actual figures and adds or subtracts a percentage to obtain the current year’s budget. It is the most common type of budget because it is simple and easy to understand.

Detailed explanation-2: -Incremental budgeting is the traditional budgeting method whereby the budget is prepared by taking the current period’s budget or actual performance as a base, with incremental amounts then being added for the new budget period.

Detailed explanation-3: -With a zero-based budgeting approach, you’d need to defend the activity and spend, if you wanted to include it in the budget. That might be a tough task, indeed. Incremental budgeting uses previous budgets and actual performance as a baseline from which to build forward-looking budgets.

Detailed explanation-4: -Rolling (or continuous) budget Here the budget is 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.