EXPLANATORY Definition

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EXPLANATORY, in accounting, is a paragraph added to an audit report to explain something, such as the reason for a qualified or adverse opinion.

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CURRENT COST ACCOUNTING is a system of accounting which adjusts for changing pricing.

VARIANCE ANALYSIS is the analysis of performance by means of variances. Used to promote management action at the earliest possible stages. After a budget (based on standard costs) has been set, its usefulness lies in the review procedures which compare actual results against the budget. Variance analysis is the process of examining in detail each variance between actual and budgeted/expected/standard costs to determine the reasons why budgeted results were not met (material costs too high, sales prices too low, etc.).

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