ZERO BASE – BUDGETING

WHAT IS ZERO BASE BUDGETING ?

• A method of Budgeting in which all expenses must be justified

For each accounting period.
• Zero based budgeting starts from a “ZERO BASE” and every function within
an organization is analyzed for its needs and costs .
• Budgets are then built around what is needed for the upcoming period
regardless of whether the budget is higher or lower than the previous one.
DIFFERENCES:

TRADITIONAL BUDGETING. ZERO BASE BUDGETING

1. It is more accounting oriented. 1. It is decision oriented.

2. Its approach is monitoring 2. Its approach is towards
towards Expenditure. achievement of objectives.
3. It’s focus is on Increase and decrease 3. It’s focus is on Cost benefit
of expenditure over the past. Analysis.
 PROCESS :

• To decide which operational Areas should be used or applied.

• The next step in ZBB Is developing Of 'decision packages’.
• Cost and benefit analysis should be undertaken.
• The final step involved in ZBB is concerned with selected, approving
decision packages and finalizing the budget.
EXAMPLE 1.
EXAMPLE 2.
THANK YOU