Budget Variance
Accounting glossary · Understand, connect, apply
A budget variance is a difference between an actual result and a specified budget benchmark. Its interpretation depends on whether it concerns revenue, cost, activity or profit and which comparison is being made.
Example
Actual maintenance cost is 7,200 against a comparable budget of 6,500. The 700 excess is an unfavourable cost variance on that basis.
Remember the difference
A favourable cost variance can reflect delayed essential work or lower output. Identify the benchmark, investigate causes and consider quality before judging performance. Sign conventions vary, so label favourable or unfavourable explicitly.
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Published 4 November 2026. Prepared with AI assistance; examples are fictional and simplified for learning.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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