What is the purpose of a 'variance report'?

What is the purpose of a 'variance report'?

• A. To forecast future sales
• B. To compare planned vs actual financial performance
• C. To summarize employee productivity
• D. To document training and development costs

Answer: (B)

A variance report serves the important role of comparing planned versus actual financial performance. In the context of financial management and accounting, it provides insights into how well an organization adheres to its budget or financial plan. By analyzing variances, organizations can identify discrepancies between what was anticipated and what actually occurred, which can indicate areas of over or underspending. This analysis is vital for making informed decisions, adjusting future budgets, and understanding operational efficiencies. The other options do not align with the primary function of a variance report. Forecasting future sales focuses on predicting revenue rather than assessing past performance. Summarizing employee productivity pertains to human resources and performance monitoring, which is not the focus of a variance report. Documenting training and development costs is about accounting for expenses related to employee training, again diverging from the variance analysis objective. Therefore, the role of a variance report as a tool for comparing planned versus actual outcomes is essential in financial reporting and analysis.

A variance report serves the important role of comparing planned versus actual financial performance. In the context of financial management and accounting, it provides insights into how well an organization adheres to its budget or financial plan. By analyzing variances, organizations can identify discrepancies between what was anticipated and what actually occurred, which can indicate areas of over or underspending. This analysis is vital for making informed decisions, adjusting future budgets, and understanding operational efficiencies.

The other options do not align with the primary function of a variance report. Forecasting future sales focuses on predicting revenue rather than assessing past performance. Summarizing employee productivity pertains to human resources and performance monitoring, which is not the focus of a variance report. Documenting training and development costs is about accounting for expenses related to employee training, again diverging from the variance analysis objective. Therefore, the role of a variance report as a tool for comparing planned versus actual outcomes is essential in financial reporting and analysis.