Budget variance

Since no one can predict the future cash flows accurately, the difference is expected and experienced between the budgeted and actual figures that difference is referred as budget variance

Budget variance = Budgeted amount - actual amount

There could be two types of Budget variances

Favorable budget variance
Negative variance or losses, when actual amount exceeds the budgeted amount

Unfavorable budget variance
Positive variance or profit/gains, when budgeted amount exceeds the actual amount