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Edit Comment Close Premium member Presentation Transcript Slide 1: 10/26/2010 ZERO BASE BUDGETING 1 PRESENTATION ON Zero Base Budgeting Presented by: Rahul jain Rajesh khandelwal Rashi Rahul tandon Pradeep joshi Contents : 10/26/2010 ZERO BASE BUDGETING 2 Contents Definition Historical development Steps Involved Advantage Limitations Zero Base Budgeting Zero Base Budgeting : 10/26/2010 ZERO BASE BUDGETING 3 Definition of Zero-Base Budgeting Zero Base Budgeting As the name suggested, it has to be justified every year before funding is made. It requires managers to start at zero budget levels every year and justify all costs as if all programs were being proposed for the first time. Historical development of Zero Base budgeting : 10/26/2010 ZERO BASE BUDGETING 4 Historical development of Zero Base budgeting At present , it is receiving serious attention from business experts as a new approach to the budgeting process. The concept of ZBB was first put forward in a crude form by E.Hilton in 1924. Historical development of Zero Base budgeting : 10/26/2010 ZERO BASE BUDGETING 5 Historical development of Zero Base budgeting Later, the former President of America, Jimmy Carter, used this technique of budgeting successfully in 1962 when he was the Governer of Georgia. Mr. Carter used it as a ground –up budgeting technique for controlling state expenditure. Historical development of Zero Base budgeting : 10/26/2010 ZERO BASE BUDGETING 6 Historical development of Zero Base budgeting This technique is commented upon by Peter Phyrr, in his article entitled ‘Zero Base Budgeting’ in 1970 when he represented it in a systematic manner. ZBB is getting popular in India. The Government of India has directed its public sector undertakings to introduce zero budgeting in their budgeting programs. Steps involved in zero base budgeting : 10/26/2010 ZERO BASE BUDGETING 7 Steps involved in zero base budgeting Organizational and budgeting objectives should be carefully laid down. The area of business where zero base budgeting is to be applied should be identified. The organization should be divided in small segments, i.e. budget units, for effective analysis and evaluation. Steps involved in zero base budgeting : 10/26/2010 ZERO BASE BUDGETING 8 The in-charge executive of the budget unit should prepare alternative spending plans as decision packages. The decision packages should be evaluated on the basis of cost and benefit analyses and ranked in order of priorities. Steps involved in zero base budgeting Advantages of zero base budgeting : 10/26/2010 ZERO BASE BUDGETING 9 Advantages of zero base budgeting It ensures efficient use of limited resources by allocating them according to the relative importance of the programs. The annual review of the programs indicates the relative worth of the programs and thus ensures no programs continues beyond its productive life. Advantages of zero base budgeting : 10/26/2010 ZERO BASE BUDGETING 10 It helps the management to design and develop cost-effective techniques for improving operations. The corporate objectives can be achieved more successfully under zero-base budgeting. The establishment of decision units makes the performance evaluation system more effective. Advantages of zero base budgeting Limitations of Zero Base Budgeting : 10/26/2010 ZERO BASE BUDGETING 11 Limitations of Zero Base Budgeting It is a costly affair and, therefore, small organization cannot afford it. The annual reviews of the programs have become mechanical with the passage of time, which makes the main objective of zero base concept fade out. The identification of decision units and decision packages creates number of problems for the organization. Limitations of Zero Base Budgeting : 10/26/2010 ZERO BASE BUDGETING 12 The process of zero base budgeting requires experiences, intelligence, expertise, and continuous training on the part of executives. Thus , it is not suitable for an ordinary organisation. They may improve long-term, commitments or fixed investments that cannot easily be shifted to other areas. Limitations of Zero Base Budgeting Bibliography : 10/26/2010 ZERO BASE BUDGETING 13 Bibliography Management Accounting : Concepts and Applications-Macmillan Publisher Budgetary Control written by Rajnish sood Financial Accounting written by subhashis Panda www.mbaforum.com www.google.com/search Slide 14: 10/26/2010 ZERO BASE BUDGETING 14 THANKS special thanks to divya mam You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.