Which statement describes incremental budgeting?

Incremental budgeting is a method that focuses on making adjustments to previous budgets rather than creating a new budget from scratch each time. This approach evaluates the prior period's budget and then makes incremental changes, which can include increases or decreases, based on factors like anticipated revenues, costs, and operational changes.

Because incremental budgeting uses existing budgets as a baseline, it allows organizations to maintain continuity and stability in their financial planning. This method also simplifies the budgeting process, as it does not require a complete re-assessment of all expenses but rather evaluates what worked well in the past and what needs improvement.

In contrast, the other options describe approaches that do not align with the nature of incremental budgeting. Starting fresh every budgeting cycle implies a different method that does not utilize past budgets, while avoiding any carryover from past expenditures suggests a complete disregard for historical financial data. The notion that it is mainly used for start-up businesses also does not reflect the reality, as incremental budgeting is applied widely across various established organizations seeking to refine their financial strategies based on past performance.