Zero Based Budgeting for Effective Financial Planning and Control
Explore Zero Based Budgeting (ZBB) as an alternative to traditional budgeting methods, its definition, features, and advantages as explained by Dr. Anil Pratap Singh. Learn how ZBB revolutionizes the budgeting process by starting from zero, promoting accountability, and efficient resource allocation.
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Presentation Transcript
ACCOUNTING FOR PLANNING AND CONTROL PART VI DR.ANIL PRATAP SINGH HEAD DEPARTMENT OF COMMERCE HARISH CHANDRA POST GRASDUATE COLLEGE VARANASI Saturday, June 21, 2025 ANIL PRATAP SINGH 1
ZERO BASE BUDGETING Zero based budgeting is an alternative to conventional or incremental budgeting. In incremental budgeting a base is determined from which the budget process begins. Quite often current year's budget is taken as the base are the starting point for preparing the next year's budget. For example, production of the current year may be taken as the base. Next year's budget for production will be current year's production plus an increase in price of row material and other expenses and expected change in production volumes. A Saturday, June 21, 2025 ANIL PRATAP SINGH 2
Zero based budgeting is a new technique of planning and decision making. This is a revolutionary step in the field of budgeting . zero based budgeting was introduced at Texas Instruments in USA in 1969 by Peter phyrr, who is known as the father of ZBB. It is a managerial tool and is steadily gaining acceptance in the business community. In this method budget figures are developed with zero as the base , which means that a budget will be prepared as if it is being prepared for a new companies for the first time. Saturday, June 21, 2025 ANIL PRATAP SINGH 3
DEFINITION OF ZERO BASE BUDGETIONG According to Peter a Pyhrr,"zero based budgeting is an operating planning and budgeting process which requires each manager to justify his entire budget request in detail from scratch (hence zero base). Each manager States why he should spend any money at all. This approach requires that all activities the identified as decision packages which will be evaluated by systematic analysis rank in order of importance."it is also defined as a system whereby each budget item, regardless of whether it is new or existing, must be justified in its entirety each time a new budget is prepared."the important part of the zero based budgeting is the requirement that the budgeting process starts at zero with all expenditures completely justified.this contrast with the usual approach in which a certain level of expenditure is allowed as a starting point and the budgeting process focuses on request for incremental expenditures. Saturday, June 21, 2025 4 ANIL PRATAP SINGH
FEATURES OF ZBB START WITHOUT BASE EFFECTIVE MANAGERIAL TOOL INDEPENDENT COMMUNICATION EASY TO FIX ACCOUNTABILITY JUSTIFIED EXPENDITURE Saturday, June 21, 2025 ANIL PRATAP SINGH 5
ADVANTAGES OF ZBB NO SCOPE OF PERPETUATING PAST INEFFICIENCY MORE EFFECTIVE ALLOCATION OF RESOURCE MORE EFFECTIVE RESPONSIBILITY ACCOUNTING IDENTIFICATION OF UNNESSARY ACTIVITIES ELASTICITY IN THIS TECHNIQUE FOCUS ON OBJECTIVES Saturday, June 21, 2025 ANIL PRATAP SINGH 6
DISADVANTAGES OF ZBB HIGHCOST PROBLEM OF RANKINGH MORE PAPER WORK THREATS IN ALL TIME REQUIREMENT OF TRANING Saturday, June 21, 2025 ANIL PRATAP SINGH 7
THEEND D Saturday, June 21, 2025 ANIL PRATAP SINGH 8
