{"id":3680,"date":"2020-02-29T14:32:01","date_gmt":"2020-02-29T14:32:01","guid":{"rendered":"https:\/\/commerceiets.com\/?p=3680"},"modified":"2020-02-29T14:32:01","modified_gmt":"2020-02-29T14:32:01","slug":"zero-base-budgeting-process","status":"publish","type":"post","link":"https:\/\/commerceiets.com\/zero-base-budgeting-process\/","title":{"rendered":"ZERO BASE BUDGETING PROCESS"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_72 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/commerceiets.com\/zero-base-budgeting-process\/#ZERO_BASE_BUDGETING_PROCESS\" title=\"ZERO BASE BUDGETING PROCESS\">ZERO BASE BUDGETING PROCESS<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/commerceiets.com\/zero-base-budgeting-process\/#EVOLUTION_OF_ZERO_BASE_BUDGETING\" title=\"EVOLUTION OF ZERO BASE BUDGETING\">EVOLUTION OF ZERO BASE BUDGETING<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/commerceiets.com\/zero-base-budgeting-process\/#FEATURES_OF_ZERO_BASE_BUDGETING\" title=\"FEATURES OF ZERO BASE BUDGETING\">FEATURES OF ZERO BASE BUDGETING<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/commerceiets.com\/zero-base-budgeting-process\/#ZERO_BASE_BUDGETING_PROCESS-2\" title=\"ZERO BASE BUDGETING PROCESS\">ZERO BASE BUDGETING PROCESS<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"has-text-align-center wp-block-heading\"><span class=\"ez-toc-section\" id=\"ZERO_BASE_BUDGETING_PROCESS\"><\/span>ZERO BASE BUDGETING PROCESS<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Zero base budgeting process is process wherein each cost element for the period is clearly justified, in terms of cost benefits. The\u00a0management\u00a0analyses and prioritizes the activities, depending on the determinants like alignment with the organizational objectives, fund availability, etc.<\/p>\n\n\n\n<p>Hence, all the activities are reassessed every time the <a href=\"https:\/\/commerceiets.com\/budget\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"budget (opens in a new tab)\">budget<\/a> is prepared. Its aim is to reduce the expenditure, by identifying the areas where cost can be cut.<\/p>\n\n\n\n<p><strong>ACCORDING TO ORIGINATOR PETER A PYHER <\/strong><\/p>\n\n\n\n<p>\u201cA planning\nand budgeting process which requires each manager to justify his entire budget\nrequest in detail from scratch (hence zero base) and shifts the burden of proof\nto each manager to justify why he should spend any money at all. The approach\nrequires that all activities be analyzed in \u2018decision packages\u2019 which are\nevaluated by systematic analysis and ranked in order of importance.\u201d<\/p>\n\n\n\n<p><strong>ACCORDING TO CHARTERED INSTITUTE OF MANAGEMENT\nACCOUNTANTS, LONDON<\/strong><\/p>\n\n\n\n<p>\u201cZero Base Budgeting is a method of budgeting\nwhereby all activities are revaluated each time a budget is set. Discrete\nlevels of each activity are valued and a combination chosen to match funds\navailable\u201d. <\/p>\n\n\n\n<p><strong>ACCORDING TO LEONARD MEREUNIT AND STEPHEN SOSMICK <\/strong><\/p>\n\n\n\n<p>\u201cZBB is a technique, which complements and\nlinks the existing planning, budgeting and review processes, it identifies\nalternative efficient methods of utilizing limited resources in effective\nattainment of selected benefits. It is a flexible management approach, which\nprovides credible rationale for reallocating resources by focusing on the\nsystematic review and justification of the funding and performance levels of current\nprogrammes or activities.<\/p>\n\n\n\n<h2 class=\"has-text-align-center wp-block-heading\"><span class=\"ez-toc-section\" id=\"EVOLUTION_OF_ZERO_BASE_BUDGETING\"><\/span><strong>EVOLUTION OF ZERO BASE BUDGETING<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In 1964, The United States Department of\nAgriculture introduced this system, but it was not found to be quite successful\nand, hence, abandoned. In the early seventies, however, it was Pytor, A. Pyhrr,\na staff control manager of Texas Instrument Corporation, United States of\nAmerica, who introduced and developed this technique through his writings.<\/p>\n\n\n\n<p>Since then, a good number of private sector\norganisations have introduced ZBB in Budgetary Control, particularly in the\nU.S.A. And again, in 1972, the State of Georgia introduced the technique and\nthe then governor of the State of Georgia, Jimmy Carter, recognised widely the\nrelevance of ZBB and when he became the president of the U.S.A., he introduced\nthis system in the Federal Govt., in 1977. The public sector undertaking also\nshowed keen interest in ZBB and adopted the technique in budgeting.<\/p>\n\n\n\n<h2 class=\"has-text-align-center wp-block-heading\"><span class=\"ez-toc-section\" id=\"FEATURES_OF_ZERO_BASE_BUDGETING\"><\/span><strong>FEATURES OF ZERO BASE BUDGETING<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\"><li>Manager of a\ndecision unit has to completely justify why there should be at all any budget\nallotment for his decision unit. This justification is to be made a fresh\nwithout making reference to previous level of spending in his department.<\/li><li>Activities\nare identified in decision packages.<\/li><li>Decision\npackages are ranked in order of priority.<\/li><li>Packages are\nevaluated by systematic analysis.<\/li><li>Under this\napproach there exist a frank relationship between superior and subordinates.\nManagement agrees to fund for a specified service and manager decision of the\ndecision unit clearly accepts to deliver the service.<\/li><li>Decision\npackages are linked with corporate objectives, which are clearly laid down.<\/li><li>Available\nresources are directed towards alternatives in order of priority to ensure\noptimum results.<\/li><\/ul>\n\n\n\n<h2 class=\"has-text-align-center wp-block-heading\"><span class=\"ez-toc-section\" id=\"ZERO_BASE_BUDGETING_PROCESS-2\"><\/span><strong>ZERO BASE BUDGETING PROCESS<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>To understand the stages of ZBB, first of all, it is needed\nto know the meaning of decision packages.&nbsp;<strong>Decision packages<\/strong>&nbsp;refer\nto the development of an operational plan for the activities for which\ndecisions are to be made. The stages are given as under:<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"203\" height=\"450\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/02\/stages-of-zero-based-budgeting-1.jpg\" alt=\"ZERO BASE BUDGETING PROCESS\" class=\"wp-image-3682\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/02\/stages-of-zero-based-budgeting-1.jpg 203w, https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/02\/stages-of-zero-based-budgeting-1-135x300.jpg 135w\" sizes=\"auto, (max-width: 203px) 100vw, 203px\" \/><figcaption>ZERO BASE BUDGETING PROCESS<\/figcaption><\/figure>\n\n\n\n<ol class=\"wp-block-list\"><li><strong>Identification\nand Description of Decision Packages<\/strong>:\nDecision package ascertains a particular activity, so as to analyse and rank\nthe activities against other activities, with respect to the use of scarce\nresources and make decisions thereon.<\/li><li><strong>Evaluation of\nDecision Packages<\/strong>: After\nidentification and description, decision packages are evaluated considering the\nfactors like alignment with the organizational objectives, regulatory\nrequirement and availability of money.<\/li><li><strong>Prioritisation\nof the Decision Packages<\/strong>: Decision\npackages are ranked on the basis of activities.<\/li><li><strong>Allocation of\nResources<\/strong>: Once the ranking is done, resources are\nallotted to the packages, which facilitates in the process of preparation of\nthe budget, as it is done for the very first time, without any consideration to\nprevious year\u2019s budgets.<\/li><\/ol>\n\n\n\n<p>The decision packages provide you with the details such as the cost involved, return, objective, expected outcome, alternatives available and consequences of non-performance of the activity.<\/p>\n\n\n\n<p><strong>JOIN THE CHANNEL ON TELEGRAM<\/strong><\/p>\n\n\n\n<p><a href=\"https:\/\/t.me\/commerceiets\" target=\"_blank\">https:\/\/t.me\/commerceiets<\/a><\/p>\n\n\n\n<p><strong>CONNECT ON LINKEDIN<\/strong><\/p>\n\n\n\n<p><a href=\"https:\/\/www.linkedin.com\/in\/kajal-mahajan-7549b2197\/\" target=\"_blank\" rel=\"noopener\">https:\/\/www.linkedin.com\/in\/kajal-mahajan-7549b2197\/<\/a><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Also Study<\/strong><\/td><td><strong>Also Study<\/strong><\/td><td><strong>Also Study<\/strong><\/td><td><strong>Also Study<\/strong><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/cost-accounting\/\">Cost Accounting<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/scope-of-cost-accounting-pdf\/\">Scope of cost accounting<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/elements-of-cost\/\">Elements of cost<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/types-of-cost\/\">Types of cost<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/material-control-in-cost-accounting-pdf\/\">Material control<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/perpetual-inventory-system\/\">Perpetual inventory system<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/pricing-of-materials\/\">Pricing of materials<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/bin-card\/\">Bin Card<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/store-ledger\/\">Stores Ledger<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/incentive-plans\/\">Incentive plans<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/overhead\/\">Overheads<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/accounting-treatment-of-idle-time\/\">Idle time<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/\">System of wage payment in cost accounting<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-time-rate-system-and-piece-rate-system\/\">Time rate vs piece rate wage system<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/cost-centre\/\">Cost Center<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/labor-turnover\/\">Labour Turnover<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/difference-between-management-accounting-and-cost-accounting\/\">Difference between management accounting and cost accounting<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/allocation-and-apportionment-of-overheads\/\">Allocation and apportionment of overheads<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-allocation-and-apportionment-of-overheads\/\">Allocation vs Apportionment of overheads<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/absorption-of-overheads\/\">Absorption of overheads<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/over-absorption-and-under-absorption-of-overheads\/\">Over absorption and under absorption of overheads<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/activity-based-costing\/\">Activity based costing<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-traditional-costing-and-activity-based-costing\/\">Traditional costing vs ABC system<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/reconciliation-of-accounts\/\">Reconciliation of accounts<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/unit-costing\/\">Unit costing<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/cost-sheet-format\/\">Cost sheet format<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/cost-sheet-vs-production-account\/\">Cost sheet vs production sheet<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/job-costing\/\">Job costing<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/batch-costing\/\">Batch Costing<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-job-costing-and-batch-costing\/\">job costing vs batch costing<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/contract-costing\/\">Contract costing<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-job-costing-and-contract-costing\/\">Job Costing vs Contract costing<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/process-costing\/\">Process Costing<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/process-costing-vs-job-costing\/\">Process costing vs job costing<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/joint-products\/\">Joint products<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/by-products\/\">By Product&nbsp;<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/equivalent-production\/\">Equivalent production<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/marginal-costing\/\">Marginal costing<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/applications-of-marginal-costing\/\">Application of marginal costing<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/cost-volume-profit-analysis\/\">Cost volume profit analysis<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/tools-and-techniques-of-marginal-costing\/\">Tools and techniques of marginal costing<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/budget\/\">Budget<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/break-even-point\/\">Break even point<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/process-of-budgetary-control\/\">Process of budgetary control<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/explain-the-advantages-and-limitations-of-budgetary-control\/\">Advantages and limitations of budgetary control<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/budgetary-control\/\">Budgetary Control<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/zero-base-budgeting\/\">Zero base budgeting<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/standard-costing\/\">Standard Costing<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/variance-analysis\/\">Variance Analysis<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-standard-costing-and-budgetary-control\/\">Standard costing vs budgetary control<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-management-accounting-and-cost-accounting\/\">Management accounting vs cost accounting<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-financial-accounting-management-accounting-and-cost-accounting\/\">Cost accounting vs financial accounting<\/a><\/td><\/tr><\/tbody><\/table><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>ZERO BASE BUDGETING PROCESS Zero base budgeting process is process wherein each cost element for the period is clearly justified, in terms of cost benefits. The\u00a0management\u00a0analyses and prioritizes the activities, depending on the determinants like alignment with the organizational objectives, fund availability, etc. Hence, all the activities are reassessed every time the budget is prepared&#8230;.<\/p>\n<p class=\"more-link-wrap\"><a href=\"https:\/\/commerceiets.com\/zero-base-budgeting-process\/\" class=\"more-link\">Read More<span class=\"screen-reader-text\"> &ldquo;ZERO BASE BUDGETING PROCESS&rdquo;<\/span> &raquo;<\/a><\/p>\n","protected":false},"author":2,"featured_media":3675,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[187],"tags":[],"class_list":["post-3680","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cost-accounting"],"_links":{"self":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/3680","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/comments?post=3680"}],"version-history":[{"count":0,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/3680\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media\/3675"}],"wp:attachment":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media?parent=3680"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/categories?post=3680"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/tags?post=3680"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}