Accountant how-to
How to Prepare a Budget Variance Analysis
Variance analysis explains why results differed from plan: the “why” is what leaders need.
Quick answer
Variance analysis explains why results differed from plan: the “why” is what leaders need. In short: pull; calculate; set, then complete the remaining steps below.
Step by step
Pull actual and budgeted results for the period.
Calculate dollar and percentage variances for each line.
Set a threshold to focus on significant variances.
Investigate causes with department managers.
Separate timing differences from permanent differences.
Write concise explanations and recommended actions.
Update forecasts if the variance will continue.
Safety reminders for accountants
- Maintain independence and objectivity, especially in audits
- Protect confidential financial and taxpayer data
- Follow professional ethics codes such as the AICPA Code of Professional Conduct
- Report suspected fraud through proper channels
Key terms
GAAP · FASB · Accrual accounting · Financial statements · Audit · Internal controls: see the full accountant glossary.