Which budgeting approach focuses on long-term, high-cost assets and funding sources?

Which budgeting approach focuses on long-term, high-cost assets and funding sources?

• A. Operating budgeting
• B. Capital budgeting
• C. Grant budgeting
• D. Debt budgeting

Answer: (B)

The concept being tested is planning for long-lived, high-cost assets and how they are financed. In local government budgeting, capital budgeting focuses on acquiring and financing big, durable items like roads, bridges, water systems, schools, and major equipment. It is handled over multiple years, weighing project priorities, lifecycles, and the best mix of funding sources such as bonds, reserves, long-term debt, and grants. This differs from operating budgets, which cover day-to-day expenses for running services. Grant budgeting centers on securing funds restricted for specific programs, while debt budgeting concentrates on managing debt service rather than the broader asset planning and funding strategy. So, capital budgeting is the approach that centers on long-term, high-cost assets and funding sources.

The concept being tested is planning for long-lived, high-cost assets and how they are financed. In local government budgeting, capital budgeting focuses on acquiring and financing big, durable items like roads, bridges, water systems, schools, and major equipment. It is handled over multiple years, weighing project priorities, lifecycles, and the best mix of funding sources such as bonds, reserves, long-term debt, and grants. This differs from operating budgets, which cover day-to-day expenses for running services. Grant budgeting centers on securing funds restricted for specific programs, while debt budgeting concentrates on managing debt service rather than the broader asset planning and funding strategy. So, capital budgeting is the approach that centers on long-term, high-cost assets and funding sources.