How to Complete a Flexible Budget Performance Report

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  • 0:03 Flexible Budget…
  • 0:49 Creation
  • 1:25 Getting Numbers
  • 1:53 Purpose
  • 2:43 Lesson Summary
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Lesson Transcript
Instructor: Kevin Newton

Kevin has edited encyclopedias, taught middle and high school history, and has a master's degree in Islamic law.

A flexible budget performance report can act as a report card on your department's flexible budget, letting people know what adjustments should be made to it for more accuracy in the future.

Flexible Budget Performance Report

As you probably know, budgets are rarely perfect. Truth be told, it's for the best that they're flexible. In fact, that's why we often call the budget from which expenses are planned the flexible budget. However, at the end of an accounting period, real numbers replace the flexible budget and other projections when accountants are trying to reconcile their data.

One of the most important documents to help accounting reconcile everything and plan for the future is the flexible budget performance report. In short, it does exactly what it says it does: it provides feedback on just how well the flexible budget performed under actual business conditions. In this lesson, we'll see how a flexible budget performance report is made, where the numbers for it come from, and the reasons for making one in the first place.

Creation

So, the flexible budget performance report is written at the end of every period. The process of making one is very straightforward. First, list all categories in which expenses were accrued. Then, in the next column, list all the actual expenses. Next to those, include the relevant figures from the flexible budget. Finally, in the final column note the difference between the actual expenses and the flexible budget. If there is a difference, be sure to notate whether or not the variance was favorable, meaning money was saved, or unfavorable, meaning more money had to be spent than was budgeted.

Getting Numbers

Luckily, the numbers to create the flexible budget performance report are relatively easy to find. You should have access to the actual amounts spent by your department from receipts. The flexible budget provides the planned numbers. To find the variances, simply subtract the actual amount spent from the corresponding number from the flexible budget. Be sure to notate whether or not the result is negative or positive, as this will inform if it's an unfavorable or favorable variance.

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