Prepare statements and use accounting techniques to reconcile budgeted and actual figures: reconciliation of budget and actual cost; budget and actual profit
A reconciliation statement explains the gap between planned and actual profit or cost. It lists every variance and shows how they combine to produce the difference.
Formula
Actual Profit = Budgeted Profit ± Sales Variances ± Cost Variances
Real World
Greggs' finance team reconciles its budgeted quarterly profit to actual profit by listing each variance — perhaps an adverse flour price variance offset by a favourable sales volume variance from a viral TikTok sausage roll trend.
Exam Focus
Start with budgeted profit, add favourable variances and subtract adverse variances — check your final figure matches the actual profit given.
Essay Framework
Use PEEL to structure every paragraph. Tap each step for guidance and an example.
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