Accounting and finance Budgeting and variance analysis

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

Variances variances are the key to analysing budgets a variance is the amount an actual figure varies from a budgeted one a variance is called favourable if the difference is going to have a positive affect for the business (e.g. higher revenues or lower costs) a variance is called adverse if the difference is going to have a negative affect on the business (e.g. lower revenues or higher costs)