Accounting - Cash variance analysis
Cash variance analysis
A variance report shows the difference between actual figures and budgeted
figures for a period of time. Variance reports may be applied to any type
of financial report. The cash variance report brings together the statement
of receipts and payments and the cash budget.
FAVOURABLE (F)/UNFAVOURABLE (UF)
BANK BALANCE - 1 JAN.
+ CASH RECEIPTS
+ 3 600
+ 11 400
TOTAL CASH RECEIVED
+ 13 000
- Cash payments
- 2 000
- 2 000
+ 1 000
+ 1 000
- 1 500
TOTAL CASH PAYMENTS
- 2 800
BANK BALANCE - 31 DEC.
The preparation of the cash variance report requires the format set out.
This is usually provided in the answer booklet in the examination. Many
figures are also provided. Reconstruction of accounts may be necessary to
determine amounts paid/received, opening or closing balances. You will also
have to determine arithmetically the amount of the variance and whether it
has been favourable or unfavourable.
Marks are hard to get and showing all cash receipts entries correct in all
columns may only earn a single mark. Many students lose marks by not
showing totals for cash receipts, payments and the bank balance.
From the above variance you may be asked:
* to comment on liquidity and to suggest strategies to help improve
* to explain the deterioration in liquidity
* to comment on whether the increased spending on vehicles is necessarily
* to link the decline in sales to other expenses and suggest reasons why
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