What are the causes of budget variances?
A budget variance is a casual measure used by governments, organizations, or people to assess
the contrast between planned and actual numbers for a given accounting category (Chen,
November 30, 2020). An ideal fluctuation in the budget variance is characterized by certain
changes or gains. An awkward budget variance difference is characterized by a negative
fluctuation, showing misfortunes or shortcomings, changes to the expenditure plan occur on the
grounds that forecasters cannot accurately forecast future expenditures and revenues.
The budget variances can be caused by a number of factors, including knowledge of financial
history, microeconomic and macroeconomic factors, and new information. You can prepare a
budget based on the previous budget, but things change. What happened may not be the same
today. The projection of the future using financial history results in budget variances.
Microeconomic factors such as changes in family structure, health, and age, and career choice
also lead to budget variances. In addition, macroeconomic factors such as the economic cycle,
unemployment, and inflation or deflation lead to budget variance (Siegel & Yacht, 2009).
Reference:
Chen, J. (November 30, 2020). Budget variance, Retrieved
from https://www.investopedia.com/terms/b/budget-variance.asp
Siegal, R. & Yacht, C. (2009). Personal Finance. Saylor Foundation. Licensed under Creative
Commons CC BY-NC-SA 3.0.
A budget variance is a casual measure used by governments, organizations, or people to assess
the contrast between planned and actual numbers for a given accounting category (Chen,
November 30, 2020). An ideal fluctuation in the budget variance is characterized by certain
changes or gains. An awkward budget variance difference is characterized by a negative
fluctuation, showing misfortunes or shortcomings, changes to the expenditure plan occur on the
grounds that forecasters cannot accurately forecast future expenditures and revenues.
The budget variances can be caused by a number of factors, including knowledge of financial
history, microeconomic and macroeconomic factors, and new information. You can prepare a
budget based on the previous budget, but things change. What happened may not be the same
today. The projection of the future using financial history results in budget variances.
Microeconomic factors such as changes in family structure, health, and age, and career choice
also lead to budget variances. In addition, macroeconomic factors such as the economic cycle,
unemployment, and inflation or deflation lead to budget variance (Siegel & Yacht, 2009).
Reference:
Chen, J. (November 30, 2020). Budget variance, Retrieved
from https://www.investopedia.com/terms/b/budget-variance.asp
Siegal, R. & Yacht, C. (2009). Personal Finance. Saylor Foundation. Licensed under Creative
Commons CC BY-NC-SA 3.0.
