Zero-based budgeting requires what practice?

Zero-based budgeting requires what practice?

• A. All line items are set to zero and the amount allotted to each must be justified.
• B. Line items are increased by inflation without justification.
• C. Only new line items require justification.
• D. The budget is based entirely on last year's actuals.

Answer: (A)

Zero-based budgeting starts from zero for every line item and requires justification for every dollar allocated. This means you don’t simply roll over last year’s numbers or apply inflation; instead, every expense must be explained from the ground up, tying spending to current goals and priorities. That’s why the practice described—setting all line items to zero and justifying the amount for each one—is the best fit. It contrasts with incremental approaches that adjust prior-year budgets or only scrutinize new items, or with methods that base the plan on last year’s actuals without the necessary justification.

Zero-based budgeting starts from zero for every line item and requires justification for every dollar allocated. This means you don’t simply roll over last year’s numbers or apply inflation; instead, every expense must be explained from the ground up, tying spending to current goals and priorities. That’s why the practice described—setting all line items to zero and justifying the amount for each one—is the best fit. It contrasts with incremental approaches that adjust prior-year budgets or only scrutinize new items, or with methods that base the plan on last year’s actuals without the necessary justification.