Which budget type requires justification for all proposed expenditures starting from zero?

• A. Zero-Based Budget
• B. Incremental Budget
• C. Combination Budget
• D. Operating Budget

Answer: (A)

The concept tested is building a budget from a clean slate where every proposed expense must be justified as if starting from zero. In zero-based budgeting, nothing is assumed from the previous period; each dollar is allocated only after being defended on its own merits. This forces a close look at priorities, reduces automatic carryovers, and ensures resources align with current goals and constraints.

An incremental approach starts from last year’s numbers and only makes small adjustments, so every item isn’t re-justified from zero. A combination method blends elements of approaches, but it doesn’t inherently require re-validating all expenditures from scratch. An operating budget focuses on ongoing, day-to-day expenses and revenues for a period, without the explicit zero-base justification requirement.