Which budgeting approach starts with past results and adjusts based on future expectations?

The budgeting approach that starts with past results and adjusts based on future expectations is known as incremental budgeting. This method uses the previous budget as a baseline and makes adjustments—such as increases or decreases—based on anticipated changes in revenues or expenses. It is a common approach because it is relatively simple and allows organizations to work within their existing framework while considering new information.

In contrast, bottom-up budgeting emphasizes inputs and estimates from various departments, which are then consolidated. Top-down budgeting sets budget limits based on overarching goals and constraints defined by upper management without heavily incorporating detailed past results. Zero-based budgeting requires justifying all expenses in each new period, starting from a "zero base," rather than simply adjusting prior budgets.