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:

1. Go to Gateway of Tally > Accounts Info > Budgets.
2. Select Create.
3. Enter a budget name, e.g., "Operations Budget 2024".
4. 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
5. 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

1. Go to Gateway of Tally > Display More Reports > Budgets & Controls.
2. Select Budget Variance.
3. Choose the budget to analyze, e.g., "Operations Budget 2024".
4. 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:

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.