How Actuals Work

An actual can be any good. Actuals are also commonly called cash goods, the original, the identification goods, or the original identification goods. These goods are crude oil, vegetable oil, natural gas, gold, copper, bronze, silver, platinum, wheat, corn, and soy oil. Most liquid contracts make up actuals because of seasonal changes. Seasons affect global productions, especially when it is an agricultural product. Actuals are the original goods used as a basis for a futures contract, and they are what you later receive at the due date of the contract's option.

But because actuals are very similar to a specific level, you must know the worth and size of the original stock beforehand. In the accounting sector, actuals refer to the revenues and expenses recorded at a certain point in time. In other words, actuals in accounting refer to the total revenue you get from an account. During the trading of actuals, the type of good and amount of money to be paid is indicated on the contract.

As the name implies, you perform the trading of actuals in physical markets, and you can also do it in the futures market. In physical markets, two individuals or groups will sign a contract stating that they will exchange goods for money. The individuals or groups may also agree to exchange one good for another. In the futures market, two individuals or groups enter into a trade agreement in which one individual or group agrees to give a specific size and worth of the original good while the other individual or group agrees to make payments for it.

Example of Actuals

A food processor company, Stella Foods, contracts to trade money in exchange for actuals with Devan Edibles. The actuals, in this case, are pounds of meat, and Stella Foods is ready to give money as payment for the pounds of meat.

Another example is the agreement of Kale's refineries to trade money in exchange for barrels of crude oil with Penny Oil. The crude oil, in this case, is the actuals which the refineries need and are willing to pay money for.

In the examples discussed above, you can see that actuals can be any product ranging from crude oil down to wheat. All these products are beneficial to refineries, manufacturers, food processors, etc., and they are willing to exchange money for it. That is because they need these commodities for production, and they must always be available to make sure that production doesn't stop along the line. When both individuals or groups in a futures contract keep to the agreement, the seller delivers the actuals to the buyer, and the buyer makes the payment.

Actuals vs. Budget

In the accounting sector, actuals mean a different thing entirely. However, it is confused with a budget most of the time. A budget is the total estimate of revenues and expenses that an account has incurred at the end of a business year. On the other hand, Actuals indicates the total revenue an account has produced or the total money it has spent in terms of expenses at a certain point in time during a business year. It is normal for a budget to change a little; however, it is bad for the actuals of a company to be very different from the budget.