Zero Base Budgeting Dr Parmila Assistant Professor of
Zero Base Budgeting Dr Parmila Assistant Professor of Commerce Kanya Mahavidyalaya Kharkhoda
Zero Base Budgeting is also known as ‘De nova budgeting’. Zero base budgeting was developed by Peter A. Pyher at Texas Instruments in USA. The new budget is not linked with the figures of previous budgets but it is prepared on the basis of new estimates, new analysis and latest data. According to CIMA, England, “Zero base budgeting can be defined as a method of Budgeting whereby all activities are revalued each time a budget is set. Discrete levels of each activities are valued and a combination chosen to match funds availability. ”
Main Features of Zero Base Budgeting The main features of Zero Base Budgeting are as Follows: üTotally afresh consideration üJustification for every amount of Expenditure üCost-Benefit analysis üLinked to corporate goals üParticipation at all levels
Steps in Zero Base Budgeting The following steps are involved in Zero Base Budgeting Determination of Budgetary objectives with reference to corporate goals Determination of Priority Ranking of decision Packages Selection of acceptable Packages and incorporation in to the Budget Determination of the scope of use of ZBB Evaluation of Decision Packages Monitoring of Costs and Objectives Determination of Decision units Development of Decision Packages
Zero Base Budgeting Vs. Traditional Budgeting The points of differences between Zero Base Budgeting and traditional budgeting are as Follows: üDifference in Process üDifference in Orientation üEmphasis on Accountability üParticipation in Decision-making üPriority of Decision Packages üPresentation for Budget
Advantages of Zero Base Budgeting are as Follows: üImprovement in Co-ordination üAllocation of Resources according to Priorities üJustification of Each Activity üNo Arbitrary Cuts or Increase in Budgets üLinkage with the enterprise Objectives üKnowledge of Wasteful Expenditure üManagement by Objectives üOperational Efficiency
limitations of Zero Base Budgeting Limitations of Zero Base Budgeting are as Follows: üExpensive Method üConflicts in Ranking üShort-term Benefits üProblems in Evaluation Benefits üTime Consuming of Qualitative
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