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ACCA Applied Skills · Performance Management · Budgetary systems and types of budget

Which of the following is a recognised feature of zero-based budgeting (ZBB)?

In zero-based budgeting, each activity is set out in a decision package and ranked by priority, with funding allocated down the ranking until resources are exhausted. Nothing is assumed from past spending, unlike incremental budgeting.

  1. AEach activity is described in a decision package and ranked in order of priorityCorrect
  2. BBudgets are updated each month by adding a further month to the end of the plan
  3. CPrior-year spending is taken as the starting point and adjusted for inflation
  4. DBudgets are set by senior management and imposed on departments without consultation

Explanation

ZBB requires managers to prepare decision packages for each activity, which are then ranked and funded in priority order until resources run out. Adding a month is rolling budgeting, using last year's spend is incremental budgeting, and imposition describes an imposed style of participation, not ZBB.

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