What is the main objective of zero-based budgeting?
Show answer & explanation
Correct answer: D
Explanation
The correct answer is option 4 i.e. Re-evaluation of all the activities every year when budget provisions are made .
Zero-based budgeting (ZBB) requires that every function within an organization is analyzed for its needs and costs from a 'zero base', rather than basing new budgets on previous ones. This means every activity is re-evaluated annually, and funding is allocated based on current needs and effectiveness, not historical spending. This approach helps eliminate outdated or inefficient expenses and encourages efficient allocation of resources.
Incorrect Options:
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Examining the objectives for which funds are provided: This is a part of performance budgeting, not the core principle of ZBB.
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Establishing a relationship between inputs and outputs: This relates more to outcome-based or performance budgeting, where efficiency is measured.
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To assess the effectiveness of each programme and activity with the output: Again, this reflects performance auditing more than ZBB, which focuses on budget justification from zero.