What is the difference between a budgeted expense and an actual expense called?

What is the difference between a budgeted expense and an actual expense called?

• A. Deviation
• B. Gap
• C. Discrepancy
• D. Variance

Answer: (D)

The main idea here is variance, the difference between what was budgeted and what actually happened. In budgeting and cost control, variance shows how far actual expenses deviate from the plan, which helps managers spot where costs ran off course and take corrective action. A positive variance often means overspending (actual is higher than budget) and is usually considered unfavorable for expenses, while a negative variance means spending was under budget and is generally favorable. Some organizations report it as actual minus budget or budget minus actual depending on their convention, but the key point is that variance is the standard term for this difference. Other terms like deviation, gap, or discrepancy are less precise in the budgeting context.

The main idea here is variance, the difference between what was budgeted and what actually happened. In budgeting and cost control, variance shows how far actual expenses deviate from the plan, which helps managers spot where costs ran off course and take corrective action. A positive variance often means overspending (actual is higher than budget) and is usually considered unfavorable for expenses, while a negative variance means spending was under budget and is generally favorable. Some organizations report it as actual minus budget or budget minus actual depending on their convention, but the key point is that variance is the standard term for this difference. Other terms like deviation, gap, or discrepancy are less precise in the budgeting context.