DECA+ Business Management and Administration Practice Exam

What is the primary requirement of zero-based budgeting?

1. Relying on figures from previous periods

2. Justifying every expense from the ground up

3. Only budgeting for essential expenses

4. Estimating budget based on past performance

The correct answer is: Justifying every expense from the ground up

The primary requirement of zero-based budgeting is that every expense must be justified from the ground up, rather than relying on previous budgets or historical data. In zero-based budgeting, each department must start from a "zero base" at the beginning of the budgeting period and then justify all proposed expenditures as if they were new. This method ensures that all spending is aligned with current goals and priorities, making it a strategic approach to budgeting. This practice promotes accountability, encourages re-evaluation of expenses, and allows organizations to allocate resources more efficiently based on actual needs rather than historical patterns. Consequently, it is a rigorous process that requires justification for every single dollar requested in the budget, fostering financial discipline and strategic alignment across the organization.