When accounting for variances, favourable variances are always debits to the variance account, and unfavourable variances are always credits to the variance account.

Question

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This statement is incorrect. Favourable variances are credited to the variance account and unfavourable variances are debited to the variance account. This is because favourable variances result in higher profits or lower costs, which increases the credit balance in the variance account, while unfavourable variances result in lower profits or higher costs, which increases the debit balance in the variance account.

When Accounting for Variances, Favourable Variances Are Always Debits to the Variance