Favorable variances are recorded with a credit to the appropriate variance account.

Question

Quizplus · Accepted Answer

Favorable variances indicate that the actual results are better than the budgeted or standard results, so they increase the overall profitability of the company. Therefore, they are recorded with a credit to the appropriate variance account, which is a contra-expense account. This means that the credit reduces the amount of expenses, resulting in a higher net income or profit.

Favorable Variances Are Recorded with a Credit to the Appropriate