A. Traditional budgeting focuses on goals and objectives B. Zero based budgeting produces a single level of appropriation for an activity C. Traditional budgeting starts with last funding appropriation D. Zero based budgeting does not systematically consider alternatives to current operations
Correct Answer: C
Explanation
Zero-Based budgeting and traditional budgeting are the two predominantly used budgeting techniques. Zero-based budgeting is a budgeting method where current budget is prepared from the scratch i.e. taking the base as zero. The old and the new activities of the business are ranked according to their importance and based on that, resources are allocated to each activity without considering the past budgets or achievements.
Traditional budgeting is a method of preparation of the budget in which the last budget is taken as the base. Current budget is prepared by making changes to previous budget by adjusting the expenses based on the inflation rate, consumer demand, market situation etc.
In case of zero-based budgeting, it is easy to eliminate an existing item or add a new item to the current budget, as zero-based budgeting is a creation of entirely new budget from the ground. In other words, zero-based budgeting is more flexible in nature.
