Question

The process of beginning a budget without regard to the amounts spent in the prior year is called:

1. Capital budgeting
2. Program budgeting
3. Zero based budgeting
4. Public interest budgeting

Answer 1

The correct answer is c.Zero based budgeting

As the name itself suggest this budgeting process does not take into account amounts spent in the prior year and it is prepared from the beginning. Since the budgeting process takes into account only the current period items all the incomes and expenditures are those that have arisen during the current period. Zero based budgeting helps in cost savings and increases accountability of the management as they need to justify items of the budget. Since the budget is prepared from the beginning it is time consuming to adhere to zero based budgeting process as all the data of the current relevant period has to be used rather than making adjustments in past data.