Incremental budgeting is defined as

Incremental budgeting is defined as

• A. An approach that uses the current year's budget as a base and adjusts for growth or inflation.
• B. A method that starts from zero for next year.
• C. A method that updates budgets only if needed.
• D. A method that ignores inflation.

Answer: (A)

Incremental budgeting relies on this year's budget as the starting point and makes small, ongoing adjustments to reflect expected changes in activity and prices. The entire budget is carried forward, with increases or decreases applied incrementally rather than rebuilding everything from scratch. This approach is efficient and provides stability, but it can carry forward past inefficiencies if not reviewed. It differs from zero-based budgeting, which starts from zero and justifies every item anew. It also wouldn’t ignore inflation, since price increases are typically reflected in the adjustments.

Incremental budgeting relies on this year's budget as the starting point and makes small, ongoing adjustments to reflect expected changes in activity and prices. The entire budget is carried forward, with increases or decreases applied incrementally rather than rebuilding everything from scratch. This approach is efficient and provides stability, but it can carry forward past inefficiencies if not reviewed. It differs from zero-based budgeting, which starts from zero and justifies every item anew. It also wouldn’t ignore inflation, since price increases are typically reflected in the adjustments.