Financial Variance Item

A Financial Variance Item is a subtraction value between an actual financial figure and its corresponding budgeted financial figure for some accounting category.

• Context:
  • It can (typically) be identified in a Financial Variance Report.
  • It can range from being a Favorable Financial Variance Item to being an Unfavorable Financial Variance Item.
  • It can range from being a Small Financial Variance to being a Large Financial Variance.
  • It can range from being a Expenditure Variance to being a Revenue Variance.
  • It can range from being a Controllable Financial Variance to being an Uncontrollable Financial Variance.
  • It can range from being a Historical Financial Variance Item to being a Forecasted Financial Variance Item.
  • It can range from being an Unexpected Financial Variance Item to being an Expected Financial Variance Item (for a forecasted financial variance).
• Example(s):
  • “Revenue receipts from parking tickets are 15% lower this quarter than budgeted.”
  • “As expected, based on last month's financial variance report review, spending on police overtime is 20% higher this month than originally budgeted.”
• Counter-Example(s):
  • a Fraudulent Credit Card Expense.
• See: Financial Variance Analysis, Management Accounting, Financial Budget, Planned Result.

---

---

References

2016

• (Wikipedia, 2016) ⇒ http://wikipedia.org/wiki/variance_(accounting) Retrieved:2016-4-14.
  • In budgeting (or management accounting in general), a variance is the difference between a budgeted, planned or standard cost and the actual amount incurred/sold. Variances can be computed for both costs and revenues.

    The concept of variance is intrinsically connected with planned and actual results and effects of the difference between those two on the performance of the entity or company.

• (Wikipedia, 2016) ⇒ http://wikipedia.org/wiki/variance_(accounting)#Types_of_variances Retrieved:2016-4-14.
  • Variances can be divided according to their effect or nature of the underlying amounts.

    When effect of variance is concerned, there are two types of variances:

    • When actual results are better than expected results given variance is described as favorable variance. In common use favorable variance is denoted by the letter F - usually in parentheses (F).
    • When actual results are worse than expected results given variance is described as adverse variance, or unfavourable variance. In common use adverse variance is denoted by the letter U or the letter A - usually in parentheses (A).
  • The second typology (according to the nature of the underlying amount) is determined by the needs of users of the variance information and may include e.g.:
    • Variable cost variances
      • Direct material variances.
      • Direct labour variances.
      • Variable production overhead variances
    • Fixed production overhead variances
    • Sales variances

2015

• http://www.investopedia.com/terms/b/budget-variance.asp
  • QUOTE: Budget variance is a periodic measure used by governments, corporations or individuals to quantify the difference between budgeted and actual figures for a particular accounting category. A favorable budget variance refers to positive variances or gains; an unfavorable budget variance describes negative variance, meaning losses and shortfalls. Budget variances occur because forecasters are unable to predict the future with complete accuracy. As a result, some variance should be expected when budgets are created.

    Budget variances can result from two sources - the things that can be controlled and things that cannot. A poorly planned budget, for example, is a controllable factor. Likewise, things like labor costs can be controlled by taking measures such as prohibiting overtime. Uncontrollable factors are often external and arise from occurrences outside of the company such as a natural disaster.

---