Defination of Zero Based Budgeting (ZBB) Method

Zero Based Budgeting is a Technique of organizing cash flow budgets and working on plans which every year must start from scrape with no pre-authorized funds. Not like the traditional (incremental) budgeting in which past sales and expenditure trends are assumed to continue, ZBB needs every activity to be acceptable on the basis of cost-benefit analysis, assumes that no present promise exists, and that there is no balance to be carried forward. By forcing the activities to be ranked according to priority, ZBB provides a systematic basis for resource allocation.

Zero Based Budgeting (ZBB):

Zero Based Budgeting (ZBB): Learning Objective of the article: Define and explain the term “zero based budgeting” and “incremental budgeting” in managerial accounting. Explain the importance and use of zero based budgeting in business. What are advantages and disadvantages of zero based budgeting? Contents: