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How does a continuous budget differ from one that is reviewed and revised once a year?
AIt is adjusted each month for 12 months ahead
BIt covers a five year horizon at fixed prices
CIt is prepared only when volume changes
DIt reports actual results instead of plans
Answer & Solution
Correct answer: A. It is adjusted each month for 12 months ahead
1. A budget prepared at fixed intervals is reviewed and revised once a year.
2. A continuous budget still extends for one year but is adjusted every month.
3. When a month passes, its data is dropped and the month 12 months ahead is added.
4. The horizon therefore stays a rolling 12 months rather than shrinking as the year runs out.
5. Both kinds are plans, so neither reports actual results.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 7.1 Introduction_
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