ExpertEasy2 marksMultiple Choice
ACCA · Question 21 · D. Budgeting
An international wildlife charity is changing its budgeting process. Previously, managers took last year's budget and added 5% for inflation. Now, management requires every department to justify all of its proposed expenditures from scratch, as if the department were being established for the first time.
Which budgeting method is the charity adopting?
An international wildlife charity is changing its budgeting process. Previously, managers took last year's budget and added 5% for inflation. Now, management requires every department to justify all of its proposed expenditures from scratch, as if the department were being established for the first time.
Which budgeting method is the charity adopting?
Answer options:
A.
Incremental budgeting
B.
Zero-based budgeting
C.
Rolling budgeting
D.
Flexible budgeting
How to approach this question
Look for the key phrase 'justify all proposed expenditures from scratch'. This defines a zero base.
Full Answer
B.Zero-based budgeting✓ Correct
Zero-based budgeting (ZBB) is a method of budgeting in which all expenses must be justified for each new period. The process starts from a 'zero base', and every function within an organization is analyzed for its needs and costs.
Common mistakes
Confusing the old method described in the prompt (incremental) with the new method being asked about.
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