The Need for Prompt and Relevant Corrective Action

Variance analysis attempts to identify discrepancy between actual and planned results. Adverse/unfavourable variance should be investigated – determine cause i.e. inefficiency or external factor, Inefficiency could be caused by lack of motivation or inappropriate training. ¬†Steps should be taken to rectify issues. External factors, such as a downturn in market, are harder to accommodate. May be necessary to amend targets […]

Accounting Variance

Variance – difference between budgeted figure and actual figure. Usually at end of budget period. Can be favourable (F) or adverse (A). Favourable variances – actual figure is better than budgeted figure. Adverse variances – actual figures are worse than budgeted figures. Managers examine variances to determine how improvements can be made.

Budgeted and Actual Figures

Budgets set out in financial terms the responsibilities of executives in relation to requirements of organisations policy. Comparing actual results against budgeted results allows managers to meet the objectives of the policy or to determine necessary revisions of the policy. Budgetary controls assist managers with planning, coordinating and controlling of individuals activities and overall performance of organisation.

Monitoring Process

Budgetary control – business looks to future & states what it wants to happen and to achieve, then decides how to get there. How does a department know that it’s performance is satisfactory. Targets set to allow business to know if objectives have been met. Results achieved compared to targets set. Control is effective if information is readily available to […]