3. Zero base Budget A managerial tool and is steadily gaining acceptance in the business community It is not based on incremental approach and previous year’s budget figures are developed with zero as the base, for preparing next year’s budget A planning & budgeting process which requires each manager to justify his entire budget request in detailed from scratch A system
whereby each budget item, regardless of whether is new or existing, must be justified in its entirety each
time anew budget is prepared”.
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Cont… Evolved especially in the public sector, as a solution to the problem of IB.
When a ZBB system is in place, managers are required to justify all budgeted expenditure in terms of programmed service levels, activities
and operations Therefore, the baseline is zero rather than the last year’s budgets This type of budgeting compels managers to assess periodically whether services and activities that are being financed are still necessary, and whether they are carried out in the most
efficient and effective manner56
