Types of budgeting Flashcards
1
Q
What is zero-based budgeting?
A
Budgets are set at zero and managers have to justify every item of expenditure.
2
Q
What is Incremental budgeting?
A
Adding a small percentage to the previous years budget or actual performance. Often in line with inflation.
3
Q
Advantages of zero-based budgeting?
A
Avoids budgets needlessly increasing.
Flexible to provide funds when needed
4
Q
Disadvantages of zero-based budgeting?
A
More time-consuming than incremental budgeting.
5
Q
Advantages of incremental budgeting?
A
Simpler and quicker than zero-based budgeting.
6
Q
Disadvantages of incremental budgeting
A
Ignores changing circumstances.
Encourages managers to spend full budget even if not needed to avoid losing it.
