ExpertEasy2 marksMultiple Choice
ACCA · Question 16 · Budgeting
Section A
FinTech Innovators operates in a highly volatile market where technology changes rapidly. They currently use an annual fixed budget but find it becomes outdated within months. Which budgeting approach would be most appropriate to resolve this issue?
Section A
FinTech Innovators operates in a highly volatile market where technology changes rapidly. They currently use an annual fixed budget but find it becomes outdated within months. Which budgeting approach would be most appropriate to resolve this issue?
Answer options:
A.
Incremental budgeting
B.
Rolling budgets
C.
Activity-based budgeting
D.
Top-down budgeting
How to approach this question
Match the problem (volatile environment, budget quickly outdated) with the solution (a budget that is constantly updated).
Full Answer
B.Rolling budgets✓ Correct
Rolling budgets (or continuous budgets) are updated regularly (e.g., monthly or quarterly) by adding a new period as the current one ends. This ensures management is always looking a full year ahead, which is ideal for volatile industries.
Common mistakes
Confusing rolling budgets with flexible budgets. Flexible budgets adjust for volume changes, while rolling budgets adjust the time horizon.
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