Zero-Based Budgeting

Business, Legal & Accounting Glossary

Definition: Zero-Based Budgeting


Quick Summary of Zero-Based Budgeting


A cash flow budget in which the manager responsible for it’s preparation is required to prepare for and justify the budgeted expenditure from a zero base. i.e. assuming that initially there is no commitment to spend on any activity. Rather than the previous year’s budget being the starting point for the next budget, a zero-based budget assumes no activities: everything in the budget must be justified.



What is the dictionary definition of Zero-Based Budgeting?

Dictionary Definition


Method of preparing cash flow budgets and operating plans which start from zero at the beginning of each year.

A Zero-base Budget (ZBB) is a cash-flow budget in which the manager responsible for it’s preparation is required to prepare and justify the budgeted expenditure from a zero base – This means assuming that there is no prior commitment to allocate any resources on any activity.


Full Definition of Zero-Based Budgeting


The proposal that the budgets of governments and other organisations should be designed starting from first principles, defining the aims of the organisation and adopting the best method of achieving them.

This is contrasted with the usual budgetary procedure, which starts from the previous period’s budget and makes marginal changes.

As real world organisations are committed to contracts with their employees and suppliers, and are affected by public perceptions about pricing and the services they require, zero-base budgeting is difficult to achieve.


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Definition Sources


Definitions for Zero-Based Budgeting are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 9th December, 2019 | 3 Views.