Budgeting — ACCA Practice Question 20

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Recall the definition of a rolling budget: a budget kept continuously up to date by adding another accounting period when the earliest period has expired.

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B.It ensures that the budget remains relevant and up-to-date by continuously extending the planning horizon.✓ Correct

A rolling budget is continuously updated by adding a new period (e.g., a month or quarter) as the current one expires. This ensures the planning horizon is always a full year (or other chosen duration) ahead, making it highly relevant in volatile markets. However, it is administratively demanding.

Common mistakes

Confusing rolling budgets with flexible budgets or zero-based budgeting.

A Software-as-a-Service (SaaS) company operates in a highly volatile market and uses rolling budgets. Which of the following is the primary advantage of using a rolling budget in this environment?

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Practice the full ACCA MA — Management Accounting Practice Exam 4

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