Which of the following statements best explains Zero Based Budgeting ........

Indian Economy (Easy) Budgeting and Fiscal policy

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Which of the following statements best explains Zero Based Budgeting?

It takes last year’s actual figures and adds or subtracts a percentage to obtain the current year’s budget.

It is a method of budgeting in which all expenses must be justified for each new period.

It is a practice of suggesting and listing of estimated outcomes of each programmes or schemes designed.

It is a method of calculating the income and expenditure without measuring the underlying performance.

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Explanation:

Zero-based budgeting (ZBB) is a method of budgeting in which all expenses must be justified for each new period. The process of zero-based budgeting starts from a "zero base," and every scheme within the budget is analyzed for its needs and costs. Budgets are then built around what is needed for the upcoming period, regardless of whether each budget is higher or lower than the previous one. The primary purpose of zero-based budgeting is the termination of activities which have become irrelevant.