“What are the key differences between Incremental and Zero Based Budgeting and when should one method be used as opposed to the other?”

What are the key differences between Incremental and Zero Based Budgeting and when should one method be used as opposed to the other?
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What are the key differences between Incremental and Zero Based Budgeting and when should one method be used as opposed to the other?
Most firms and corporations have the choices to make between budgeting methods. The types of firms, the length of their budgeting period and the amount of money they have for the budget are the factors of influence. In this paper, the methods of budgeting, their advantages and disadvantages and the choice over the other are analyzed. The analysis focuses on incremental and zero-based budgeting for the firms.
Companies that have similar items to cater for in different years use the same list for subsequent years. Hey refer to the same list and make necessary adjustments depending on the needed changes. This type of budgeting that uses the current budget as reference to the next budget is called incremental budgeting. When using this budget, organizations are expected to use the minimum resources as they use in the current times (Pidgeon, 2010). Changes in the availability and amount of resources will affect the amount of money to be allocated to each item. For organizations that do no conduct a financial analysis at the end of each year, the budget works correctly for them (Pidgeon, 2010). The budgets for fixed requirements are maintained while for increment, an organization will subtract or add some fields (Pidgeon, 2010). The advantages of incremental budget are on ease of formulation and room for adjustments. (Pidgeon, 2010). The budget has shortcomings like being fixed which discourages innovations for organizations
Zero-based budgeting is used for case...