Skip to content

ACCA Applied Knowledge · Management Accounting · Nature and purpose of budgeting

Which budgeting approach requires every budget holder to justify all planned expenditure from a zero base for each new budget period, rather than using the previous period's figures as a starting point?

Zero-based budgeting is the approach in which every budget holder must justify all planned expenditure from scratch each period. Nothing is carried forward automatically from last year's figures, unlike incremental budgeting, which simply adds an adjustment to the previous period's actual or budgeted amounts.

  1. AIncremental budgeting
  2. BZero-based budgetingCorrect
  3. CRolling budgeting
  4. DFlexible budgeting

Explanation

Zero-based budgeting starts from nothing, and each activity must be justified and ranked in terms of its costs and benefits. Incremental budgeting is the opposite, as it adds an adjustment to the prior period's figures. Rolling budgets are continually updated, and flexible budgets adjust for activity levels.

Did you get it right without looking?

One question tells you little. A timed set on Nature and purpose of budgeting shows your real accuracy, how long you take and where you lose marks.

Practise Nature and purpose of budgetingFree diagnostic mock

More Nature and purpose of budgeting questions