Senior Professional in Human Resources (SPHR) Certification Practice Exam 2025 - Free SPHR Practice Questions and Study Guide

The correct type of budget that starts from scratch each year is zero-based budgeting. This budgeting approach requires all expenses to be justified for each new period, as opposed to previous budgets being used as a baseline. In zero-based budgeting, every function within an organization is analyzed for its needs and costs, ensuring that all expenditures are necessary and aligned with the organization's goals. This method encourages careful consideration of resource allocation, eliminates unnecessary expenditures, and allows the organization to reallocate funds to areas that may need more financial support.

In contrast, incremental budgeting builds on the previous year's budget, making adjustments primarily based on changes or percentages, which does not require a thorough examination of all expenditures. Bottom-up budgeting gathers input from the lower levels of management to create a budget, reliant on existing structures and previous budgets rather than starting anew. Top-down budgeting involves the upper management setting the budget limits and distributing those among departments based on what they believe is necessary. Each of these methods retains some elements of prior budgets, which is why they do not start entirely from scratch like zero-based budgeting does.