What is required in zero-based budgeting?

• A. Justification for all budget line items
• B. A review of previous spending trends
• C. Establishing fixed budgets per department
• D. Documentation for projected revenue income

Answer: (A)

Zero-based budgeting requires justification for all budget line items because this method involves starting the budgeting process from scratch, rather than using the previous year’s budget as a foundation. Every expense must be analyzed and justified for each new period, regardless of past expenditures. This approach ensures that all budgetary allocations are connected to the current organizational goals, allowing for more strategic resource allocation. Each department must justify its budget requests based on their current needs and anticipated outcomes, ensuring that funds are directed toward the most effective programs and activities. This differs from traditional budgeting, which may rely on historical spending trends or other less rigorous forms of assessment. Thus, the focus of zero-based budgeting is on current needs rather than past practices, making justification for each line item essential.