Analyzing Variance Between Actual Performance and Budgeted Figures in Tally Prime
Variance analysis in Tally Prime enables businesses to identify differences between actual financial performance and predefined budgeted figures. This helps in understanding areas where expenses or revenues deviate from the plan and taking corrective actions. Here is a step-by-step guide with an example to analyze variances effectively in Tally Prime.
Step-by-Step Guide
Step 1: Create Budgets
To perform variance analysis, you must first create budgets in Tally Prime. Follow these steps:
Go to Gateway of Tally > Accounts Info > Budgets.
Select Create.
Enter a budget name, e.g., "Operations Budget 2024".
Define budget allocations for groups, ledgers, or cost centers. For example:
Group: "Direct Expenses" - ₹1,000,000
Ledger: "Electricity Expenses" - ₹200,000
Cost Center: "Delhi Branch" - ₹300,000
Save the budget by pressing Ctrl+A.
Step 2: Record Actual Transactions
Ensure all actual transactions are recorded in Tally Prime for the selected period. For example:
Direct Expenses recorded: ₹1,050,000
Electricity Expenses recorded: ₹220,000
Expenses for Delhi Branch recorded: ₹280,000
Step 3: Access Budget Variance Report
Go to Gateway of Tally > Display More Reports > Budgets & Controls.
Select Budget Variance.
Choose the budget to analyze, e.g., "Operations Budget 2024".
Specify the period, e.g., 1-Apr-2024 to 31-Mar-2025.
Step 4: Analyze Variance
Once the Budget Variance Report is displayed, review the following columns:
Budgeted Amount: The allocated budget for the group, ledger, or cost center.
Actual Amount: The recorded transactions during the period.
Variance: The difference between the budgeted and actual amounts.
% of Budget: The percentage of the budget utilized.
For example, the variance analysis may look like this:
Category
Budgeted Amount (₹)
Actual Amount (₹)
Variance (₹)
% of Budget
Direct Expenses
1,000,000
1,050,000
-50,000
105%
Electricity Expenses
200,000
220,000
-20,000
110%
Delhi Branch
300,000
280,000
20,000
93%
Step 5: Interpret the Variances
From the variance analysis:
Direct Expenses exceeded the budget by ₹50,000, indicating overspending.
Electricity Expenses also exceeded the budget by ₹20,000, requiring attention to energy management.
Delhi Branch expenses are under the budget by ₹20,000, showing cost efficiency in that area.
Step 6: Take Corrective Actions
Based on the variance analysis, businesses can:
Investigate reasons for overspending in Direct and Electricity Expenses.
Optimize resource usage to prevent future deviations.
Reallocate unused budget from areas with surplus, like the Delhi Branch, to areas needing additional resources.
Conclusion
Analyzing variances in Tally Prime is a vital tool for effective financial management. It highlights areas of overspending or cost savings and provides insights for better decision-making. By following the steps outlined in this guide, you can utilize Tally Prime to maintain financial discipline and improve overall performance.