Which budgeting approach requires estimates for major categories based on experience?

Which budgeting approach requires estimates for major categories based on experience?

• A. Bottom-up
• B. Top-down
• C. Rolling
• D. Adaptive

Answer: (B)

Top-down budgeting uses experience to set the overall targets and estimate major spending categories. In this approach, senior management uses past performance, market knowledge, and strategic priorities to determine high-level budget levels, then allocates resources to broad categories rather than requiring each department to submit detailed line-item requests. This contrasts with bottom-up budgeting, where departments forecast their own needs in detail and those estimates are summed to form the total budget. Rolling budgeting updates the plan regularly as conditions change, and adaptive budgeting emphasizes flexibility to shifting circumstances. So, the budgeting approach that relies on experience to estimate major categories is top-down budgeting.

Top-down budgeting uses experience to set the overall targets and estimate major spending categories. In this approach, senior management uses past performance, market knowledge, and strategic priorities to determine high-level budget levels, then allocates resources to broad categories rather than requiring each department to submit detailed line-item requests. This contrasts with bottom-up budgeting, where departments forecast their own needs in detail and those estimates are summed to form the total budget. Rolling budgeting updates the plan regularly as conditions change, and adaptive budgeting emphasizes flexibility to shifting circumstances. So, the budgeting approach that relies on experience to estimate major categories is top-down budgeting.