What is the term for creating a budget as if each year were the first year it was ever prepared?

The term for creating a budget as if each year were the first year it was ever prepared is zero-based budgeting. This approach requires that all expenses must be justified for each new period, rather than simply using the previous year's budget as a starting point and adjusting for expected changes.

Zero-based budgeting starts from a "zero base," meaning that every function within an organization is evaluated for its needs and costs, and every budget cycle begins from scratch. This method encourages organizations to prioritize their activities and allocate resources more efficiently, focusing on value and necessity instead of just incremental changes based on past expenditures.

In contrast, incremental budgeting involves making adjustments to the previous year’s budget without a comprehensive review of all expenses, which may lead to inefficiencies. Dynamic budgeting refers to adjusting the budget in response to changes throughout the year, while rolling budgeting entails continuously updating the budget to include future periods, typically on a quarterly basis. These other methods do not start from a zero base, which is the distinguishing characteristic of zero-based budgeting.