Question

In: Accounting

What is a zero-based budget? Participative budget?

What is a zero-based budget? Participative budget?

Solutions

Expert Solution

Zero - based budget: Zero-based budgeting is a method of budgeting in which all expenses must be justified for each new period. Zero-based budgeting starts from a "zero base" and every function within an organization is analyzed for its needs and costs. Budgets are then built around what is needed for the upcoming period regardless of whether the budget is higher or lower than the previous one.

ZBB allows top-level strategic goals to be implemented into the budgeting process by tying them to specific functional areas of the organization. Costs can be first grouped, then measured against previous results and current expectations.

Participative budget

Participative budgeting is a budgeting process under which those people impacted by a budget are actively involved in the budget creation process.

This bottom-up approach to budgeting tends to create budgets that are more achievable than are top-down budgets that are imposed on a company by senior management, with much less participation by employees. Participatory budgeting is also better for morale, and tends to result in greater efforts by employees to achieve what they predicted in the budget. However, a purely participative budget does not take high-level strategic considerations into account, so management needs to provide employees with guidelines regarding the overall direction of the company, and how their individual departments fit into that direction.


Related Solutions

self-imposed budget or participative budget is a budget that is prepared with the full cooperation and...
self-imposed budget or participative budget is a budget that is prepared with the full cooperation and participation of managers at all levels. Individuals at all levels of the organization are viewed as members of the team whose judgments are valued by top management. Do you think if this type of budget has, any Advantages if so discuss these advantages of Self-Imposed Budgets?
what is a example of incremental budgeting, zero-based budgeting and modified zero-based budgeting
what is a example of incremental budgeting, zero-based budgeting and modified zero-based budgeting
What is a zero-based channel? What role does inventory management play in achieving a zero-based channel?...
What is a zero-based channel? What role does inventory management play in achieving a zero-based channel? What methods are available for reducing inventory?
which among these is plausible: 1. Zero based budgeting 2. Activity based budgeting 3. Rolling budget.
which among these is plausible: 1. Zero based budgeting 2. Activity based budgeting 3. Rolling budget.
With zero-based budgeting, each expenditure item must be justified for the new budget period.” Explain.
With zero-based budgeting, each expenditure item must be justified for the new budget period.” Explain.
According to your textbook, “A budget can have a significant impact on human behaviour…Participative budgeting can...
According to your textbook, “A budget can have a significant impact on human behaviour…Participative budgeting can foster budgetary “gaming”… a budget can be a manager’s friend or foe”. Required: Critically evaluate the issues raised in the above excerpt. b) Return on Investment (ROI) is commonly used to measure divisional performance and awards bonuses to divisional management based on their division’s performance. Describe two examples on how a manager can improve his/her division’s ROI, but which may harm the future competitiveness...
Describe Participative Budgeting and identify six benefits of participative budgeting? ( 500 words limit )
Describe Participative Budgeting and identify six benefits of participative budgeting? ( 500 words limit )
What are the advantages and disadvantages of conventional budgeting versus zero-based budgeting?
What are the advantages and disadvantages of conventional budgeting versus zero-based budgeting?
A channel can be zero-based when targeted at one segment and not zero-based when when targeted...
A channel can be zero-based when targeted at one segment and not zero-based when when targeted at another segment. True or false? Explain your answer.
differences and similarities between activity-based budget and project-based budget
differences and similarities between activity-based budget and project-based budget
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT