Certified Professional Public Buyer (CPPB) Practice Test

Which budgeting approach emphasizes a complete justification for each expense at the start of each new budget period?

1. Incremental budgeting

2. Zero-based budgeting

3. Rolling budgets

4. Fixed budgets

The correct answer is: Zero-based budgeting

Zero-based budgeting is the approach that emphasizes a complete justification for each expense at the start of each new budget period. This method requires that all expenses must be justified for each new period, rather than simply adjusting the previous year’s budget based on incremental changes. Each department must analyze their needs and justify their budget requests, starting from a "zero base," rather than carrying forward previous budgets. This approach encourages organizations to align their spending with current priorities, eliminate unnecessary expenses, and allocate resources efficiently, as it requires a thorough justification for every line item. By mandating that all expenditures be justified and based on current needs rather than historical allocations, zero-based budgeting promotes accountability and strategic financial planning. Other budgeting methods like incremental budgeting build upon previous budgets and do not require full justification of every expense, which differs fundamentally from zero-based budgeting. Rolling budgets and fixed budgets also do not follow this model of justification for every budget cycle. Thus, the emphasis on justifying every expense distinctly characterizes zero-based budgeting as the right approach in this context.