A variance is **the difference between actual and budgeted income and expenditure**.

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## How do you calculate variance in business?

To calculate budget variances, simply **subtract the actual amount spent from the budgeted amount for each line item**.

## What are examples of variances?

For example, **if you budget for sales to be $10,000 and actual sales are $8,000, variance analysis yields a difference of $2,000**.

## What does variance mean in accounting terms?

A variance in accounting is **the difference between a forecasted amount and the actual amount**. Variances are common in budgeting, but you can have a variance in anything that you forecast. Basically, whenever you predict something, you’re bound to have either a favorable or unfavorable variance.

## Why is variance important in business?

Variance analysis provides organisations with a lot of benefits, including: Planning: **Helps managers to budget smarter and more accurately**. Control: Assists in more significant control management of departments and budgeting. Responsibility: Helps with the assignment of trust within an organisation.

## What does variance mean in a budget?

A budget variance is **an accounting term that describes instances where actual costs are either higher or lower than the standard or projected costs**. An unfavorable, or negative, budget variance is indicative of a budget shortfall, which may occur because revenues miss or costs come in higher than anticipated.

## What is variance in simple terms?

Variance is **a measure of how data points differ from the mean**. According to Layman, a variance is a measure of how far a set of data (numbers) are spread out from their mean (average) value. Variance means to find the expected difference of deviation from actual value.

## What is variance in financial report?

A variance report is **a document that compares planned financial outcomes with the actual financial outcome**. In other words: a variance report compares what was supposed to happen with what happened. Usually, variance reports are used to analyze the difference between budgets and actual performance.