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Hi,
There is a question in the mock exam that says: ‘which of the following statements is/are true?
1) Rolling budgets are budgets that are updated periodically throughout the year in question
2) Rolling budgets force managers to take the budget process more seriously.The correct answer is ‘only statement 2 is correct’. Can you explain why statement 1 is incorrect?
Thanks,
I have no idea which mock exam you are referring to 🙂
However, rolling budgets do not simply update the existing budget for the year.
They prepare a new budget for the following 12 month period. This usually happens every month (but it doesn’t have to be every month) and although it does involve updating the remaining 11 months of the existing budget it also means budgeting for an extra month each time.If what I have just written is at all confusing, then do watch my free lectures explaining rolling budgets and then re-read what I have written 🙂
Many companies do prepare a budget for the year and then update it during the year, but that is not a rolling budget – the updated budget is still for the same year.
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