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Sir I wanted to ask u that is it true when preparing incremental budgets any particular item of revenue or cost is only taken into account or adjusted for in this year’s budget only if that item of revenue or cost constitutes some kind of an increment i.e an item of revenue or cost is only adjusted for if there is an increase in revenue or cost in this year as compared to the previous year??? And what if the revenue or cost has decreased in this year as compared to previous year will that be taken into account if there is a decrease?
Because Increment means an INCREASE of some kind?
With incremental budgeting to prepare the budget for next year, we take this years figures and adjust for expected changes in the level of activity and for changes in the selling price and changes in costs.
Although strictly you are correct in that increment means an increase, if it was the case that we were expecting lower activity and/or lower revenue or costs, then we would take that into account and reduce the figures in the budget.
However that is not very likely in exam questions because most businesses will usually be budgeting on increasing activity and usually there will be inflation rather than deflation 🙂
Sir so can i take the meaning that incremental budgeting adjusts for an expected increase only from the exam point of view and anykind of decrease is not adjusted for in an incremental budget?
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