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Do variance accounts have an impact on financial statements? Or are they for performance evaluation only?

Author:
Harold Averkamp, CPA, MBA

Since the financial statements must reflect the cost principle, both the standard costs and the variances must be included in the financial statements.

For example, if a direct material has a standard cost of $400 but the company paid $422, the financial statement must report $422 (the standard cost of $400 plus the price variance of $22).

How the variances are reported on the financial statements is discussed in the last part of our Explanation of Standard Costing.

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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

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