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Rational Approaches and Incremental Approaches Budgeting

Distinguish between rational approaches and incremental approaches budgeting.

What are the challenges of state and local budgeting.

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Differences between a rational approach to budgeting and an incremental approach to budgeting:

Rational Approach to budgeting involves preparing a budget from a zero base where the budget do not rely on historical trends or carried from one period to the other. Each item in the budgets is considered and justified. Budgetary needs and priorities are reassessed and then resources allocated once a fresh look at the budget has been taken. On the other hand incremental approach to budgeting takes into account a previous period's budget using this as basis to make increments and changes to fit the current period's budget. The budgeting process in this approach involves making marginal adjustments to the current budget from the previous period's budget. These marginal increments are mainly based on negotiations and compromise, and therefore based on differing views in decision making. The budgets are often adjusted for known factors such as service developments, additional resources, price inflation, and new legislations among others (Davies, 1991; Northern Ireland Assembly, 2010).

Unlike the incremental approach which only considered one year, rational approach to budgeting assesses the ...

Solution Summary

The solution discusses rational approaches and incremental approaches budgeting.

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