With historical trend budgeting, all line items are set to zero and the amount of funds allotted to each must be justified.

With historical trend budgeting, all line items are set to zero and the amount of funds allotted to each must be justified.

• A. True
• B. False
• C. Not sure
• D. Sometimes

Answer: (B)

Historical trend budgeting starts from what was spent in the past and then adjusts those amounts to reflect expected changes, such as inflation, contract renewals, or changes in service levels. You review each line item, keep a realistic baseline, and justify only the adjustments rather than discarding the entire history. This approach emphasizes continuity and data-driven projection of ongoing costs. This is different from starting from zero and needing every dollar justified anew, which is the hallmark of zero-based budgeting. In a historical trend approach, you don’t reset all line items to zero; you base future spending on what has actually occurred, then apply reasonable adjustments.

Historical trend budgeting starts from what was spent in the past and then adjusts those amounts to reflect expected changes, such as inflation, contract renewals, or changes in service levels. You review each line item, keep a realistic baseline, and justify only the adjustments rather than discarding the entire history. This approach emphasizes continuity and data-driven projection of ongoing costs.

This is different from starting from zero and needing every dollar justified anew, which is the hallmark of zero-based budgeting. In a historical trend approach, you don’t reset all line items to zero; you base future spending on what has actually occurred, then apply reasonable adjustments.