The correct answer is: A. There is no context of previous budget.
Zero-based budgeting (ZBB) is an approach to budgeting in which every expense item is justified for each new budget period, rather than being automatically continued from the previous period. This means that every expense must be justified, regardless of whether it was budgeted for in the previous period.
ZBB is a bottom-up budgeting process, which means that it starts with individual departments or units and then aggregates their budgets into a total budget for the organization. This is in contrast to top-down budgeting, which starts with the organization’s overall budget and then allocates funds to individual departments or units.
ZBB is a more rigorous and time-consuming budgeting process than traditional budgeting methods. However, it can lead to more efficient and effective use of resources.
Here is a brief explanation of each option:
- Option A: There is no context of previous budget. This is the correct answer. In ZBB, every expense item is justified for each new budget period, rather than being automatically continued from the previous period. This means that every expense must be justified, regardless of whether it was budgeted for in the previous period.
- Option B: Working plans are prepared. Working plans are prepared in all budgeting methods, not just ZBB.
- Option C: Operating budget is not prepared. The operating budget is a financial plan that outlines the organization’s expected revenues and expenses for the upcoming fiscal year. It is prepared in all budgeting methods, not just ZBB.
- Option D: No target is fixed. A target is always fixed in budgeting, regardless of the method used. The target is usually the organization’s financial goal for the upcoming fiscal year.