Incremental budgeting means the budget that can be prepared on the basis of incremental changes with the current period budget as a starting point. The purpose of an incremental budget is to estimate the budget by taking the incremental changes that can be cash inflows and cash outflows.
Assume that a traditional budget does not include the additional cost of technology that a company has to purchase to penetrate in the market. These additional costs can be maintenance cost that will incur every month. Due to this change incorporated in the budget, the budget will also include the cash inflows as a result of savings due to the reduced cost of production.
