Which budgeting method assumes all activities will continue unchanged from year to year?

Incremental budgeting is a method that operates under the assumption that existing activities and expenditures will continue at a consistent level from one year to the next, making only minor adjustments for expected changes, such as inflation or changes in costs. This method takes the budget from the previous year and adds or subtracts a percentage based on anticipated factors, such as increases in salaries or utility costs.

Using incremental budgeting allows organizations to maintain stability and predictability in their financial planning, as it relies on past spending patterns and does not require a comprehensive reconsideration of the entire budget each year. This can streamline the budgeting process and make it quicker, but it can also lead to inefficiencies if past decisions were not sound or if changes in business conditions are not adequately addressed.

In stark contrast, zero-based budgeting requires that every expense be justified for each new period, top-down budgeting emphasizes directives from upper management without input from lower levels, and bottom-up budgeting involves input and creation of the budget from lower management levels, none of which assume continuity of all activities as incremental budgeting does.