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21.11 Budget Variance Report

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VCE Accounting Unit 4

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21.11 Budget Variance Report

  1. 1. 21.11 BUDGET VARIANCE REPORT
  2. 2. © Michael Allison, Trinity Grammar School. Author’s permission required for external use  The purpose of preparing a budget is so that budgeted results can be compared to actual results  A Budget Variance Report is an accounting report that is prepared to compare the differences between budget estimates and actual results 21.11 BUDGET VARIANCE REPORT Actual results Budgeted results Variance- =
  3. 3. © Michael Allison, Trinity Grammar School. Author’s permission required for external use Item Any item from the firm’s financial reports Budgeted The expected result Actual The actual result Variance Budget less actual result Result Either favourable or unfavourable  Format of a Budget Variance Report… Item Budget Actual Variance Favourable / Unfavourable Item Budget Actual Variance Favourable / Unfavourable Cash sales Item Budget Actual Variance Favourable / Unfavourable Cash sales 9,000 Item Budget Actual Variance Favourable / Unfavourable Cash sales 9,000 10,000 Item Budget Actual Variance Favourable / Unfavourable Cash sales 9,000 10,000 1,000 Item Budget Actual Variance Favourable / Unfavourable Cash sales 9,000 10,000 1,000 Favourable Always expressed as a positive Item Budget Actual Variance Favourable / Unfavourable Cash sales 9,000 10,000 1,000 Favourable Collections from debtors Item Budget Actual Variance Favourable / Unfavourable Cash sales 9,000 10,000 1,000 Favourable Collections from debtors 11,000 Item Budget Actual Variance Favourable / Unfavourable Cash sales 9,000 10,000 1,000 Favourable Collections from debtors 11,000 8,000 Item Budget Actual Variance Favourable / Unfavourable Cash sales 9,000 10,000 1,000 Favourable Collections from debtors 11,000 8,000 3,000 Item Budget Actual Variance Favourable / Unfavourable Cash sales 9,000 10,000 1,000 Favourable Collections from debtors 11,000 8,000 3,000 Unfavourable Item Budget Actual Variance Favourable / Unfavourable Cash sales 9,000 10,000 1,000 Favourable Collections from debtors 11,000 8,000 3,000 Unfavourable Wages expense Item Budget Actual Variance Favourable / Unfavourable Cash sales 9,000 10,000 1,000 Favourable Collections from debtors 11,000 8,000 3,000 Unfavourable Wages expense 1,500 Item Budget Actual Variance Favourable / Unfavourable Cash sales 9,000 10,000 1,000 Favourable Collections from debtors 11,000 8,000 3,000 Unfavourable Wages expense 1,500 2,500 Item Budget Actual Variance Favourable / Unfavourable Cash sales 9,000 10,000 1,000 Favourable Collections from debtors 11,000 8,000 3,000 Unfavourable Wages expense 1,500 2,500 1,000 Item Budget Actual Variance Favourable / Unfavourable Cash sales 9,000 10,000 1,000 Favourable Collections from debtors 11,000 8,000 3,000 Unfavourable Wages expense 1,500 2,500 1,000 Unfavourable Actual results Budgeted results Variance- = 21.11 BUDGET VARIANCE REPORT
  4. 4. © Michael Allison, Trinity Grammar School. Author’s permission required for external use  Determining if a result is favourable or unfavourable… Favourable Variance = Where the Actual result is better than the Budgeted result Unfavourable Variance = Where the Actual result is worse than the Budgeted result Not MORE than Actual results Budgeted results Variance- = 21.11 BUDGET VARIANCE REPORT
  5. 5. © Michael Allison, Trinity Grammar School. Author’s permission required for external use Cash inflows Revenues Profits Budgeted Actual Unfavourable > = Actual Budgeted Favourable> = Item Budget Actual Variance Favourable / Unfavourable Collections from debtors 15,000 18,000 3,000 Item Budget Actual Variance Favourable / Unfavourable Collections from debtors 15,000 18,000 3,000 Favourable Item Budget Actual Variance Favourable / Unfavourable Collections from debtors 15,000 18,000 3,000 Favourable Credit sales 25,000 21,000 4,000 Item Budget Actual Variance Favourable / Unfavourable Collections from debtors 15,000 18,000 3,000 Favourable Credit sales 25,000 21,000 4,000 Unfavourable Item Budget Actual Variance Favourable / Unfavourable Collections from debtors 15,000 18,000 3,000 Favourable Credit sales 25,000 21,000 4,000 Unfavourable Net profit 7,000 8,000 1,000 Item Budget Actual Variance Favourable / Unfavourable Collections from debtors 15,000 18,000 3,000 Favourable Credit sales 25,000 21,000 4,000 Unfavourable Net profit 7,000 8,000 1,000 Favourable 21.11 BUDGET VARIANCE REPORT
  6. 6. © Michael Allison, Trinity Grammar School. Author’s permission required for external use Cash outflows Expenses Budgeted Actual Favourable > = Actual Budgeted Unfavourable> = Item Budget Actual Variance Favourable / Unfavourable Payments to creditors 8,000 10,000 2,000 Item Budget Actual Variance Favourable / Unfavourable Payments to creditors 8,000 10,000 2,000 Unfavourable Item Budget Actual Variance Favourable / Unfavourable Payments to creditors 8,000 10,000 2,000 Unfavourable Insurance 2,400 1,800 600 Item Budget Actual Variance Favourable / Unfavourable Payments to creditors 8,000 10,000 2,000 Unfavourable Insurance 2,400 1,800 600 Favourable Item Budget Actual Variance Favourable / Unfavourable Payments to creditors 8,000 10,000 2,000 Unfavourable Insurance 2,400 1,800 600 Favourable Wages 25,000 22,000 3,000 Item Budget Actual Variance Favourable / Unfavourable Payments to creditors 8,000 10,000 2,000 Unfavourable Insurance 2,400 1,800 600 Favourable Wages 25,000 22,000 3,000 Favourable 21.11 BUDGET VARIANCE REPORT
  7. 7. © Michael Allison, Trinity Grammar School. Author’s permission required for external use  The Variance can also be expressed as a percentage: % Variance Variance Budgeted result= / Item Budget Actual Variance $ Variance % Favourable / Unfavourable Collections from debtors 15,000 18,000 3,000 Favourable Payments to creditors 8,000 10,000 2,000 Unfavourable Item Budget Actual Variance $ Variance % Favourable / Unfavourable Collections from debtors 15,000 18,000 3,000 20.0% Favourable Payments to creditors 8,000 10,000 2,000 Unfavourable Item Budget Actual Variance $ Variance % Favourable / Unfavourable Collections from debtors 15,000 18,000 3,000 20.0% Favourable Payments to creditors 8,000 10,000 2,000 25.0% Unfavourable Actual results Budgeted results Variance- = 21.11 BUDGET VARIANCE REPORT
  8. 8. © Michael Allison, Trinity Grammar School. Author’s permission required for external use  A Budget Variance Report can be prepared for: Cash Flow Statement Income Statement Actual results Budgeted results Variance- = 21.11 BUDGET VARIANCE REPORT
  9. 9. © Michael Allison, Trinity Grammar School. Author’s permission required for external use Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 GST collected 1,200 1,400 100 Payments to creditors (6,000) (5,000) 1,000 Electricity (1,000) (1,000) 0 GST paid (300) (420) 120 Net Cash Flow from Operating Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Net Cash Flow from Investing Financing Activities Loan 0 2,000 2,000 Drawings (1,000) (800) 200 Net Cash Flow from Financing Net increase (decrease) in cash Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Payments to creditors (6,000) (5,000) 1,000 Electricity (1,000) (1,000) 0 GST paid (300) (420) 120 Net Cash Flow from Operating Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Net Cash Flow from Investing Financing Activities Loan 0 2,000 2,000 Drawings (1,000) (800) 200 Net Cash Flow from Financing Net increase (decrease) in cash Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Electricity (1,000) (1,000) 0 GST paid (300) (420) 120 Net Cash Flow from Operating Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Net Cash Flow from Investing Financing Activities Loan 0 2,000 2,000 Drawings (1,000) (800) 200 Net Cash Flow from Financing Net increase (decrease) in cash Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 GST paid (300) (420) 120 Net Cash Flow from Operating Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Net Cash Flow from Investing Financing Activities Loan 0 2,000 2,000 Drawings (1,000) (800) 200 Net Cash Flow from Financing Net increase (decrease) in cash Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Net Cash Flow from Operating Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Net Cash Flow from Investing Financing Activities Loan 0 2,000 2,000 Drawings (1,000) (800) 200 Net Cash Flow from Financing Net increase (decrease) in cash Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Net Cash Flow from Investing Financing Activities Loan 0 2,000 2,000 Drawings (1,000) (800) 200 Net Cash Flow from Financing Net increase (decrease) in cash Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating 5,900 Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Net Cash Flow from Investing Financing Activities Loan 0 2,000 2,000 Drawings (1,000) (800) 200 Net Cash Flow from Financing Net increase (decrease) in cash Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating 5,900 8,180 Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Net Cash Flow from Investing Financing Activities Loan 0 2,000 2,000 Drawings (1,000) (800) 200 Net Cash Flow from Financing Net increase (decrease) in cash Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating 5,900 8,180 2,280 Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Net Cash Flow from Investing Financing Activities Loan 0 2,000 2,000 Drawings (1,000) (800) 200 Net Cash Flow from Financing Net increase (decrease) in cash Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating 5,900 8,180 2,280 Favourable Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Net Cash Flow from Investing Financing Activities Loan 0 2,000 2,000 Drawings (1,000) (800) 200 Net Cash Flow from Financing Net increase (decrease) in cash Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating 5,900 8,180 2,280 Favourable Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Unfavourable Net Cash Flow from Investing Financing Activities Loan 0 2,000 2,000 Drawings (1,000) (800) 200 Net Cash Flow from Financing Net increase (decrease) in cash Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating 5,900 8,180 2,280 Favourable Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Unfavourable Net Cash Flow from Investing (5,000) Financing Activities Loan 0 2,000 2,000 Drawings (1,000) (800) 200 Net Cash Flow from Financing Net increase (decrease) in cash Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating 5,900 8,180 2,280 Favourable Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Unfavourable Net Cash Flow from Investing (5,000) (6,400) Financing Activities Loan 0 2,000 2,000 Drawings (1,000) (800) 200 Net Cash Flow from Financing Net increase (decrease) in cash Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating 5,900 8,180 2,280 Favourable Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Unfavourable Net Cash Flow from Investing (5,000) (6,400) 1,400 Financing Activities Loan 0 2,000 2,000 Drawings (1,000) (800) 200 Net Cash Flow from Financing Net increase (decrease) in cash Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating 5,900 8,180 2,280 Favourable Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Unfavourable Net Cash Flow from Investing (5,000) (6,400) 1,400 Unfavourable Financing Activities Loan 0 2,000 2,000 Drawings (1,000) (800) 200 Net Cash Flow from Financing Net increase (decrease) in cash Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating 5,900 8,180 2,280 Favourable Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Unfavourable Net Cash Flow from Investing (5,000) (6,400) 1,400 Unfavourable Financing Activities Loan 0 2,000 2,000 Favourable Drawings (1,000) (800) 200 Net Cash Flow from Financing Net increase (decrease) in cash Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating 5,900 8,180 2,280 Favourable Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Unfavourable Net Cash Flow from Investing (5,000) (6,400) 1,400 Unfavourable Financing Activities Loan 0 2,000 2,000 Favourable Drawings (1,000) (800) 200 Favourable Net Cash Flow from Financing Net increase (decrease) in cash Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating 5,900 8,180 2,280 Favourable Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Unfavourable Net Cash Flow from Investing (5,000) (6,400) 1,400 Unfavourable Financing Activities Loan 0 2,000 2,000 Favourable Drawings (1,000) (800) 200 Favourable Net Cash Flow from Financing (1,000) Net increase (decrease) in cash Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating 5,900 8,180 2,280 Favourable Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Unfavourable Net Cash Flow from Investing (5,000) (6,400) 1,400 Unfavourable Financing Activities Loan 0 2,000 2,000 Favourable Drawings (1,000) (800) 200 Favourable Net Cash Flow from Financing (1,000) 1,200 Net increase (decrease) in cash Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating 5,900 8,180 2,280 Favourable Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Unfavourable Net Cash Flow from Investing (5,000) (6,400) 1,400 Unfavourable Financing Activities Loan 0 2,000 2,000 Favourable Drawings (1,000) (800) 200 Favourable Net Cash Flow from Financing (1,000) 1,200 800 Net increase (decrease) in cash Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating 5,900 8,180 2,280 Favourable Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Unfavourable Net Cash Flow from Investing (5,000) (6,400) 1,400 Unfavourable Financing Activities Loan 0 2,000 2,000 Favourable Drawings (1,000) (800) 200 Favourable Net Cash Flow from Financing (1,000) 1,200 800 Favourable Net increase (decrease) in cash Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating 5,900 8,180 2,280 Favourable Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Unfavourable Net Cash Flow from Investing (5,000) (6,400) 1,400 Unfavourable Financing Activities Loan 0 2,000 2,000 Favourable Drawings (1,000) (800) 200 Favourable Net Cash Flow from Financing (1,000) 1,200 800 Favourable Net increase (decrease) in cash (100) Cast at start Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating 5,900 8,180 2,280 Favourable Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Unfavourable Net Cash Flow from Investing (5,000) (6,400) 1,400 Unfavourable Financing Activities Loan 0 2,000 2,000 Favourable Drawings (1,000) (800) 200 Favourable Net Cash Flow from Financing (1,000) 1,200 800 Favourable Net increase (decrease) in cash (100) Cast at start 3,000 Cash at end Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating 5,900 8,180 2,280 Favourable Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Unfavourable Net Cash Flow from Investing (5,000) (6,400) 1,400 Unfavourable Financing Activities Loan 0 2,000 2,000 Favourable Drawings (1,000) (800) 200 Favourable Net Cash Flow from Financing (1,000) 1,200 800 Favourable Net increase (decrease) in cash (100) Cast at start 3,000 Cash at end (2,900) Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating 5,900 8,180 2,280 Favourable Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Unfavourable Net Cash Flow from Investing (5,000) (6,400) 1,400 Unfavourable Financing Activities Loan 0 2,000 2,000 Favourable Drawings (1,000) (800) 200 Favourable Net Cash Flow from Financing (1,000) 1,200 800 Favourable Net increase (decrease) in cash (100) 2,980 Cast at start 3,000 Cash at end (2,900) Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating 5,900 8,180 2,280 Favourable Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Unfavourable Net Cash Flow from Investing (5,000) (6,400) 1,400 Unfavourable Financing Activities Loan 0 2,000 2,000 Favourable Drawings (1,000) (800) 200 Favourable Net Cash Flow from Financing (1,000) 1,200 800 Favourable Net increase (decrease) in cash (100) 2,980 Cast at start 3,000 3,000 Cash at end (2,900) Cash Flow Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Operating Activities Cash sales 12,000 14,000 1,000 Favourable GST collected 1,200 1,400 100 Favourable Payments to creditors (6,000) (5,000) 1,000 Favourable Electricity (1,000) (1,000) 0 -- GST paid (300) (420) 120 Unfavourable Net Cash Flow from Operating 5,900 8,180 2,280 Favourable Investing Activities Purchase of vehicle (5,000) (6,400) 1,400 Unfavourable Net Cash Flow from Investing (5,000) (6,400) 1,400 Unfavourable Financing Activities Loan 0 2,000 2,000 Favourable Drawings (1,000) (800) 200 Favourable Net Cash Flow from Financing (1,000) 1,200 800 Favourable Net increase (decrease) in cash (100) 2,980 Cast at start 3,000 3,000 Cash at end (2,900) 5,980 21.11 BUDGET VARIANCE REPORT
  10. 10. © Michael Allison, Trinity Grammar School. Author’s permission required for external use Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Credit sales 7,000 6,000 1,000 Total Sales less Cost of Goods Sold Cost of sales 4,000 4,500 500 Gross Profit less Stock loss 200 100 100 Adjusted Gross Profit less Other Expenses Wages 1,000 800 200 Rent 2,000 2,000 0 Insurance 200 250 50 Bad debts 800 500 300 Total Other Expenses Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Credit sales 7,000 6,000 1,000 Total Sales less Cost of Goods Sold Cost of sales 4,000 4,500 500 Gross Profit less Stock loss 200 100 100 Adjusted Gross Profit less Other Expenses Wages 1,000 800 200 Rent 2,000 2,000 0 Insurance 200 250 50 Bad debts 800 500 300 Total Other Expenses Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales less Cost of Goods Sold Cost of sales 4,000 4,500 500 Gross Profit less Stock loss 200 100 100 Adjusted Gross Profit less Other Expenses Wages 1,000 800 200 Rent 2,000 2,000 0 Insurance 200 250 50 Bad debts 800 500 300 Total Other Expenses Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 less Cost of Goods Sold Cost of sales 4,000 4,500 500 Gross Profit less Stock loss 200 100 100 Adjusted Gross Profit less Other Expenses Wages 1,000 800 200 Rent 2,000 2,000 0 Insurance 200 250 50 Bad debts 800 500 300 Total Other Expenses Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 less Cost of Goods Sold Cost of sales 4,000 4,500 500 Gross Profit less Stock loss 200 100 100 Adjusted Gross Profit less Other Expenses Wages 1,000 800 200 Rent 2,000 2,000 0 Insurance 200 250 50 Bad debts 800 500 300 Total Other Expenses Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 less Cost of Goods Sold Cost of sales 4,000 4,500 500 Gross Profit less Stock loss 200 100 100 Adjusted Gross Profit less Other Expenses Wages 1,000 800 200 Rent 2,000 2,000 0 Insurance 200 250 50 Bad debts 800 500 300 Total Other Expenses Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Gross Profit less Stock loss 200 100 100 Adjusted Gross Profit less Other Expenses Wages 1,000 800 200 Rent 2,000 2,000 0 Insurance 200 250 50 Bad debts 800 500 300 Total Other Expenses Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Unfavourable Gross Profit less Stock loss 200 100 100 Adjusted Gross Profit less Other Expenses Wages 1,000 800 200 Rent 2,000 2,000 0 Insurance 200 250 50 Bad debts 800 500 300 Total Other Expenses Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Unfavourable Gross Profit 6,000 less Stock loss 200 100 100 Adjusted Gross Profit less Other Expenses Wages 1,000 800 200 Rent 2,000 2,000 0 Insurance 200 250 50 Bad debts 800 500 300 Total Other Expenses Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Unfavourable Gross Profit 6,000 5,100 less Stock loss 200 100 100 Adjusted Gross Profit less Other Expenses Wages 1,000 800 200 Rent 2,000 2,000 0 Insurance 200 250 50 Bad debts 800 500 300 Total Other Expenses Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Unfavourable Gross Profit 6,000 5,100 900 less Stock loss 200 100 100 Adjusted Gross Profit less Other Expenses Wages 1,000 800 200 Rent 2,000 2,000 0 Insurance 200 250 50 Bad debts 800 500 300 Total Other Expenses Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Unfavourable Gross Profit 6,000 5,100 900 Unfavourable less Stock loss 200 100 100 Adjusted Gross Profit less Other Expenses Wages 1,000 800 200 Rent 2,000 2,000 0 Insurance 200 250 50 Bad debts 800 500 300 Total Other Expenses Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Unfavourable Gross Profit 6,000 5,100 900 Unfavourable less Stock loss 200 100 100 Favourable Adjusted Gross Profit less Other Expenses Wages 1,000 800 200 Rent 2,000 2,000 0 Insurance 200 250 50 Bad debts 800 500 300 Total Other Expenses Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Unfavourable Gross Profit 6,000 5,100 900 Unfavourable less Stock loss 200 100 100 Favourable Adjusted Gross Profit 5,800 less Other Expenses Wages 1,000 800 200 Rent 2,000 2,000 0 Insurance 200 250 50 Bad debts 800 500 300 Total Other Expenses Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Unfavourable Gross Profit 6,000 5,100 900 Unfavourable less Stock loss 200 100 100 Favourable Adjusted Gross Profit 5,800 5,000 less Other Expenses Wages 1,000 800 200 Rent 2,000 2,000 0 Insurance 200 250 50 Bad debts 800 500 300 Total Other Expenses Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Unfavourable Gross Profit 6,000 5,100 900 Unfavourable less Stock loss 200 100 100 Favourable Adjusted Gross Profit 5,800 5,000 800 less Other Expenses Wages 1,000 800 200 Rent 2,000 2,000 0 Insurance 200 250 50 Bad debts 800 500 300 Total Other Expenses Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Unfavourable Gross Profit 6,000 5,100 900 Unfavourable less Stock loss 200 100 100 Favourable Adjusted Gross Profit 5,800 5,000 800 Unfavourable less Other Expenses Wages 1,000 800 200 Rent 2,000 2,000 0 Insurance 200 250 50 Bad debts 800 500 300 Total Other Expenses Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Unfavourable Gross Profit 6,000 5,100 900 Unfavourable less Stock loss 200 100 100 Favourable Adjusted Gross Profit 5,800 5,000 800 Unfavourable less Other Expenses Wages 1,000 800 200 Favourable Rent 2,000 2,000 0 Insurance 200 250 50 Bad debts 800 500 300 Total Other Expenses Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Unfavourable Gross Profit 6,000 5,100 900 Unfavourable less Stock loss 200 100 100 Favourable Adjusted Gross Profit 5,800 5,000 800 Unfavourable less Other Expenses Wages 1,000 800 200 Favourable Rent 2,000 2,000 0 -- Insurance 200 250 50 Bad debts 800 500 300 Total Other Expenses Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Unfavourable Gross Profit 6,000 5,100 900 Unfavourable less Stock loss 200 100 100 Favourable Adjusted Gross Profit 5,800 5,000 800 Unfavourable less Other Expenses Wages 1,000 800 200 Favourable Rent 2,000 2,000 0 -- Insurance 200 250 50 Unfavourable Bad debts 800 500 300 Total Other Expenses Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Unfavourable Gross Profit 6,000 5,100 900 Unfavourable less Stock loss 200 100 100 Favourable Adjusted Gross Profit 5,800 5,000 800 Unfavourable less Other Expenses Wages 1,000 800 200 Favourable Rent 2,000 2,000 0 -- Insurance 200 250 50 Unfavourable Bad debts 800 500 300 Favourable Total Other Expenses Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Unfavourable Gross Profit 6,000 5,100 900 Unfavourable less Stock loss 200 100 100 Favourable Adjusted Gross Profit 5,800 5,000 800 Unfavourable less Other Expenses Wages 1,000 800 200 Favourable Rent 2,000 2,000 0 -- Insurance 200 250 50 Unfavourable Bad debts 800 500 300 Favourable Total Other Expenses 4,000 Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Unfavourable Gross Profit 6,000 5,100 900 Unfavourable less Stock loss 200 100 100 Favourable Adjusted Gross Profit 5,800 5,000 800 Unfavourable less Other Expenses Wages 1,000 800 200 Favourable Rent 2,000 2,000 0 -- Insurance 200 250 50 Unfavourable Bad debts 800 500 300 Favourable Total Other Expenses 4,000 3,550 Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Unfavourable Gross Profit 6,000 5,100 900 Unfavourable less Stock loss 200 100 100 Favourable Adjusted Gross Profit 5,800 5,000 800 Unfavourable less Other Expenses Wages 1,000 800 200 Favourable Rent 2,000 2,000 0 -- Insurance 200 250 50 Unfavourable Bad debts 800 500 300 Favourable Total Other Expenses 4,000 3,550 450 Net Profit Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Unfavourable Gross Profit 6,000 5,100 900 Unfavourable less Stock loss 200 100 100 Favourable Adjusted Gross Profit 5,800 5,000 800 Unfavourable less Other Expenses Wages 1,000 800 200 Favourable Rent 2,000 2,000 0 -- Insurance 200 250 50 Unfavourable Bad debts 800 500 300 Favourable Total Other Expenses 4,000 3,550 450 Favourable Net Profit 1,800 Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Unfavourable Gross Profit 6,000 5,100 900 Unfavourable less Stock loss 200 100 100 Favourable Adjusted Gross Profit 5,800 5,000 800 Unfavourable less Other Expenses Wages 1,000 800 200 Favourable Rent 2,000 2,000 0 -- Insurance 200 250 50 Unfavourable Bad debts 800 500 300 Favourable Total Other Expenses 4,000 3,550 450 Favourable Net Profit 1,800 1,450 Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Unfavourable Gross Profit 6,000 5,100 900 Unfavourable less Stock loss 200 100 100 Favourable Adjusted Gross Profit 5,800 5,000 800 Unfavourable less Other Expenses Wages 1,000 800 200 Favourable Rent 2,000 2,000 0 -- Insurance 200 250 50 Unfavourable Bad debts 800 500 300 Favourable Total Other Expenses 4,000 3,550 450 Favourable Net Profit 1,800 1,450 350 Income Statement Budget Variance Report Item Budget Actual Variance Fav /Unfav Revenue Cash sales 3,000 3,600 600 Favourable Credit sales 7,000 6,000 1,000 Unfavourable Total Sales 10,000 9,600 400 Unfavourable less Cost of Goods Sold Cost of sales 4,000 4,500 500 Unfavourable Gross Profit 6,000 5,100 900 Unfavourable less Stock loss 200 100 100 Favourable Adjusted Gross Profit 5,800 5,000 800 Unfavourable less Other Expenses Wages 1,000 800 200 Favourable Rent 2,000 2,000 0 -- Insurance 200 250 50 Unfavourable Bad debts 800 500 300 Favourable Total Other Expenses 4,000 3,550 450 Favourable Net Profit 1,800 1,450 350 Unfavourable 21.11 BUDGET VARIANCE REPORT
  11. 11. © Michael Allison, Trinity Grammar School. Author’s permission required for external use  Once a Budget Variance Report has been done, the process doesn’t end there… Period 1 Period 2 Period 3 Perform a Budget Variance Report Identify any problems Take corrective action Develop a new budget 21.11 BUDGET VARIANCE REPORT Perform a Budget Variance Report Identify any problems Take corrective action Develop a new budget Etc…
  12. 12. © Michael Allison, Trinity Grammar School. Author’s permission required for external use  Why shouldn’t a Budget Variance Report just be done once per year or every 6 months?  What if a significant problem has been occurring since early in the year? E.g. high bad debts  If this is not identified early then the issue will cause problems throughout the year and corrective action will be too late 1 Jan 31 Dec Budget Variance Report done here Bad debts became an issue here… Bad debts problems continue all year Corrective action finally taken here 21.11 BUDGET VARIANCE REPORT
  13. 13. © Michael Allison, Trinity Grammar School. Author’s permission required for external use  If budgeting occurs more frequently then this gives management greater control  Significant variances can be fixed before they cause too much damage 1 Jan 31 Dec Budget Variance Report done here Bad debts became an issue here… Corrective action finally taken here 31 Mar 30 Jun 30 Sep Check if the action solved the problem with a Budget Variance Report 21.11 BUDGET VARIANCE REPORT
  14. 14. © Michael Allison, Trinity Grammar School. Author’s permission required for external use  How can a budget be used to manage, control and improve the business? Step 1 – Compare actual and budgeted results Step 2 – Identify any significant variances Step 3 – Take corrective action to improve performance Step 4 – Prepare a new budget The Budgeting Process 21.11 BUDGET VARIANCE REPORT
  15. 15. © Michael Allison, Trinity Grammar School. Author’s permission required for external use  What is a significant variance?  Significant variances:  Variances which affected the firm’s results and decision-making (Relevance)  Must be investigated:  Was it a poor performance or was the budget figure incorrect?  Insignificant variances:  Variances which are small and insignificant and don’t affect decision- making  Do not need to be investigated. 21.11 BUDGET VARIANCE REPORT
  16. 16. © Michael Allison, Trinity Grammar School. Author’s permission required for external use TASK In-class Homework SQ14 X SQ15 X SQ16 X SQ17 X SQ18 X Ex21.14 X Ex21.15 X Ex21.16 X Ex21.17 not (c) or (d) X Case study X

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