Which statement best describes rolling budgets?

• A. They reduce the need for variance analysis
• B. They limit planning to a short horizon
• C. They maintain up-to-date forecasts by extending horizon with new periods
• D. They eliminate budgeting errors completely

Answer: (C)

Rolling budgets keep a forecast current by continually adding the next time period to the plan, so the horizon stays the same length. As each period passes, actual results replace the forecasted figures and a new period is added at the end, kept at a constant forward look. This approach ensures the budget is always up to date and extended into the future, which is why this description fits best.

Imagine a 12-month rolling budget updated every month: after month ends, you replace it with actuals and insert a new month at the end. The forecast remains continuously forward-looking rather than fixed to a single year.

The other ideas aren’t as accurate: rolling budgets don’t eliminate the need for variance analysis; they still require comparing actual results with the rolling forecast to understand performance. They also don’t limit planning to a short horizon; they actually maintain a forward-looking view. And they don’t remove budgeting errors completely—forecasts are still estimates and can be wrong, even with a rolling approach.