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To calculate the rolling budget we first need to calculate the growth of budgeted sales, budgeted cost; Adminsitrative & Selling cost; Other costs (if mentioned in the question) that we expect it to be in the future years.
Actual activity results of one quarter will be given in the question to help calculate the Actual activity level for the following four quarters until quarter 1 of the next year.
We simply adjust the growth to the Actual activity to get the results for the following quarters
That is all we’re going to be asked in rolling budgets?
I did not see you explaining any example on this & wonder whether they come often in exams or not!
Could you simply explain what is the difference between incremental budgeting and rolling budgeting because in both of them we are adjusting growth & any other possible changes in a budget. The only difference is that in rolling budgets we are considering quarters while incremental is used for one whole period (ie. 12 months).
Incremental budgeting is producing a budget once a year for a 12 month period.
With rolling budgets we keep rewriting the budget (which might be every month or every three months or whatever – there is no rule), for the 12 months from the time of rewriting. We adjust the figures in the existing budget if necessary and add a further period so as to make it 12 months.
How we adjust the existing budget and how we budget for the extra period depends on the information given in the question. Using the past growth in sales is likely to be needed.
Calculation questions involving the preparation of rolling budgets are not very common in the exam, but can certainly be asked. I assume that you will have a Revision Kit from one of the ACCA Approved Publishers, in which case you will have a few examples to practice on and learn from.
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