accounting and finance budgeting and variance analysis
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Accounting and finance
Budgeting and variance analysis
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The budgeting process
• this involves a business looking into the future, deciding what it wants to happen and then deciding how it is going to reach these aims
• the stages involved are as follows;
preparation of plans
comparison of plans with actual results
analysis of variances
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Variances
• variances are the key to analysing budgets• a variance is the amount an actual figure
varies from a budgeted onea variance is called favourable ifthe difference is going to have apositive affect for the business
(e.g. higher revenues or lower costs)
a variance is called adverse ifthe difference is going to have
a negative affect on the business(e.g. lower revenues or higher costs)