Which statement best describes zero-base budgeting?

• A. It starts from zero and builds the budget from there, requiring justification for each item.
• B. It starts with last year's figure and adjusts for inflation.
• C. It eliminates the need for justification for line items after it's used for a year.
• D. It only applies to new programs.

Answer: (A)

Zero-base budgeting requires building the budget from scratch each cycle, with every expense item needing justification. This means nothing is automatically carried forward; managers must explain why each line item is needed and allocate funds based on current priorities and goals. The best description reflects this approach, unlike traditional budgeting which starts from last year’s numbers and adjusts for changes. The other statements misrepresent the method: you don’t eliminate justification after a year, and the technique isn’t limited to new programs—it's applied to all expenditures to ensure resources align with present objectives.