Top-down budgeting is based on estimates for major categories based on experience.

Top-down budgeting is based on estimates for major categories based on experience.

• A. Top-down
• B. Bottom-up
• C. Bottom-up and Top-down combined
• D. Zero-based

Answer: (A)

Top-down budgeting starts with senior management using experience and strategic priorities to set the overall budget targets. The major spending categories are estimated at a high level, and resources are then allocated downward to departments, which work within those allocations. This approach emphasizes centralized control and speed, ensuring the budget mirrors strategic goals. It differs from bottom-up budgeting, which begins with department-level requests and builds up to a total, and from zero-based budgeting, which starts from zero each period and requires justification for every item. A combined approach uses elements of both, but the description given fits the top-down method.

Top-down budgeting starts with senior management using experience and strategic priorities to set the overall budget targets. The major spending categories are estimated at a high level, and resources are then allocated downward to departments, which work within those allocations. This approach emphasizes centralized control and speed, ensuring the budget mirrors strategic goals. It differs from bottom-up budgeting, which begins with department-level requests and builds up to a total, and from zero-based budgeting, which starts from zero each period and requires justification for every item. A combined approach uses elements of both, but the description given fits the top-down method.