Variance Analysis for Twin Rivers Cafe

FINANCE PROJECT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
a) Objective of preparing budget for Twin River Cafe ...............................................................1
b) Report showing revenue and spendings variances for July.....................................................2
c) Activity of concern in variance to the management................................................................3
d.) Measures for supporting the objectives of Twin Rivers Cafe ...............................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Financial accounting helps company to record all the transactions to know the
performance of company in a given period. It helps company to assess the health and financial
position. The management and outside users make decisions using the financial report of
company. Twin Rivers Cafe wants to identify the variances in it actual and budgeted figures.
a) Objective of preparing budget for Twin River Cafe
Companies go through budgeting process to design, implement and operate budget. It is a
managerial process of planning and preparing budgetary controls and related procedures. Process
of budgeting is referred at highest level in terms of future accounting indicating definite course
of actions and not just reporting(Hernandez, Jonker and Kosse, 2017).
Twin River prepares the budgets for the following objectives.
Providing Structure
Budgets give cafe the direction in which it is supposed to move ahead and enables the
management in planning further course of action. Budget helps the cafe to proceed towards a
particular direction giving it a sense of direction to follow. Budget provide structure to be
followed by organisations. The structuring helps the cafe to prioritise the activities that are
important for cafe.
Cash Flow predictions
Budgets are useful for cafes that are having irregular sales. Cafe have to spend the
considerable amount of time in making estimates for the cash requirements during the term. The
estimation is important for enabling the cafe to avoid the cash related transactions. Budgeting
gives a idea about the yearly cash flows for the cafe.
Allocating Resources
Budgeting helps cafe in proper resource allocation to various activities. It provide the
cafe to decide whether to allocate funds over a particular activity or not. For smooth flow of
operation it is important that activities are allocated with required funds and resources (Diao,
Sarkar and Jan, 2016.
Measuring performance
Performance also helps in measuring performance of the cafe with actual expenses with
that of the budgets. The variances in budget are essential for the cafe to ensure that actual
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