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Zero Based Budgeting: Definition, Benefits and How to Create

What Is Zero-Based Budgeting?

How to Create a Zero-Based Budget?

What Is the Use of Zero-Based Budgeting?

Example of Zero-Based Budgeting

Zero-Based Budgeting vs Traditional Budgeting

Traditional budgeting is the most widely used budgeting technique. The following table will take you through the differences between traditional and zero-based budgeting:

Traditional Budgeting

Zero-based Budgeting

Calculation involves the previous period's budget.

The calculation does not involve any influence from the previous budget and is done from scratch.

Influenced by numbers of the previous budget.

Considers current financial requirements.

Perspective depends on historical data.

Perspective depends on estimated data.

Orientation is based on accounting.

Orientation is based on units and their goals.

The final decision is mostly influenced by whoever makes the previous budget.

The final decision is in the hands of the upper management.

Caters to all the departments in an organisation collectively.

Focuses on the departments that have the potential to make profits.

What Are the Advantages of Zero-Based Budgeting?

What Are the Disadvantages of Zero-Based Budgeting?

FAQs about Zero Based Budgeting