Accounting

The Zero-Based Budgeting technique was originally developed for use in government organizations as a way to justify cost request for the following year. The U.S. department of Agriculture was the first department to implement Zero-Based Budgeting in the 1960s. Although Zero-Based Budgeting was developed by Texas Instruments in 1970s, it was initially adopted by many government organizations during the same period of 1970s and 1980s. Zero-Based Budgeting gained fame in 1977 when President Jimmy Carter introduced Zero-Based Budgeting into the federal budgeting system.

Zero-Based Budgeting is used by managers to review and analyze programs, proposals, activities, and functions to increase profitability enhance efficiency, or lower costs. Zero-Based Budgeting is basically a microeconomic tool that the government uses to transform objectives into efficient operating plans. Zero-Based Budgeting facilitates the state or governmental decision makers to combine planning, budgeting and operational decision making into a systematic process. An important element of this budgeting procedure is that it helps design the priority of government programs and activities. When the government faces deficiency in their revenue, Zero-Based Budgeting plays its part to provide ranking programs and activities based on overall effectiveness and provide the best available alternatives. In addition, companies such as Xerox Corporation, Westinghouse Electric Corporation, and Texas Instruments Inc. are using Zero-Based Budgeting, and its use is expected to continue to grow (Doraiswamy).

Zero-Based Budgeting demands more time and energy than conventional budget, because it enforces management and government officials to develop a consensus among the departments synchronizing the information across all the departments or functions, giving a holistic picture to the decision maker (Doraiswamy).

ADVANTAGES FOR THE GOVERNMENT
Zero-Based Budgeting also has some advantages for the government. The advantages are stated below
Zero-Based Budgeting forces government to identify vague and ineffective expenditures, helping identify the highest utility of a particular resource, thereby ensuring logical and efficient distribution of resources. (Doraiswamy).                                            

Allocation of resources under the Zero-Based Budgeting makes the overall process or system more productive (Doraiswamy).

Zero-Based Budgeting also identifies where the much needed opportunity is available and highlight populist or unsustainable activities providing the best alternative. Moreover, Zero-Based Budgeting also facilitates application of the optimal strategy in a fast growing environment. (Doraiswamy).  
Zero-Based Budgeting not only improves the financial credibility of the government but also provide ways to raising more revenue. (Doraiswamy).

DISADVANTAGES FOR THE GOVERNMENT
Zero-Based Budgeting also has some disadvantages for the government, some of which are stated below
It does not provide an idealistic initiative to the government, as it may advise you to cut the budget for a department, despite the fact that particular department requires more attention and care to help improve its functionality. (Doraiswamy).

Downsizing an activity (like construction etc) on the half way may create hurdles for the government officials to accomplish the work at the right time.

Allowing an existing activity to be curtailed indirectly might create negative implications on the project itself and the government on a whole.

The budgets for most of the third world countries are often prepared on insufficient data, so getting the appropriate results at the appropriate time may not be realistic. (Doraiswamy, 2000). In addition, another form of exploitation may occur in the form of intentional misrepresentation and misappropriation of funds in appropriate departments under the umbrella of Zero-Based Budgeting.

WHY FAVOR ZERO-BASED BUDGETING
Zero-Based Budgeting focuses on the existence of government programs that should be fulfilled in each fiscal year. Zero-Based Budgeting is often encouraged as a fiscal watchdog in order to enforce government not to incur unnecessary spending. Zero-Based Budgeting benefits organization or government in several ways.
Zero-Based Budgeting focuses on the business processes and draws a comprehensive analysis on objectives and needs (Doraiswamy).

Zero-Based Budgeting provides planning and budgeting under one roof.

Zero-Based Budgeting enforces the managers to evaluate the effectiveness and efficiency of every department (Doraiswamy).

Zero-Based Budgeting invites all level of management to participate in planning and budgeting process (Doraiswamy).