Which of the following best describes a rolling budget?

Which of the following best describes a rolling budget?

• A. A budget that is fixed annually
• B. A continuously updated financial plan
• C. A budget with no set limits
• D. A plan that requires quarterly updates

Answer: (B)

A rolling budget is characterized by its continuous updating mechanism, which allows it to adapt to changing circumstances throughout the year. This type of budget does not remain static; instead, it is frequently revised and extended. For example, if a business operates on a yearly planning cycle, a rolling budget may be revised each month to include the next month, thus always maintaining a full year of budgeted figures. This adaptability ensures that the budget remains relevant and aligned with the current operational environment and business goals, making it a dynamic financial planning tool. The other choices do not accurately capture the essence of a rolling budget. A fixed annual budget implies that it does not change throughout the year, which is contrary to the nature of a rolling budget. A budget with no set limits suggests a lack of boundaries in spending, which fails to define the specific financial planning aspect of rolling budgets. Lastly, a plan that requires quarterly updates does not encompass the continuous nature of a rolling budget, which can be updated on a more frequent basis. Therefore, the best description of a rolling budget is its nature as a continuously updated financial plan.

A rolling budget is characterized by its continuous updating mechanism, which allows it to adapt to changing circumstances throughout the year. This type of budget does not remain static; instead, it is frequently revised and extended. For example, if a business operates on a yearly planning cycle, a rolling budget may be revised each month to include the next month, thus always maintaining a full year of budgeted figures. This adaptability ensures that the budget remains relevant and aligned with the current operational environment and business goals, making it a dynamic financial planning tool.

The other choices do not accurately capture the essence of a rolling budget. A fixed annual budget implies that it does not change throughout the year, which is contrary to the nature of a rolling budget. A budget with no set limits suggests a lack of boundaries in spending, which fails to define the specific financial planning aspect of rolling budgets. Lastly, a plan that requires quarterly updates does not encompass the continuous nature of a rolling budget, which can be updated on a more frequent basis. Therefore, the best description of a rolling budget is its nature as a continuously updated financial plan.