Before proceeding to explain the meaning of the term administrative accounting, it is necessary to determine its etymological origin. In this sense, we would have to state that it emanates from Latin:
• Accounting, is the result of the sum of several Latin components: the prefix “with”, which means “globally”; the verb “putare”, which is synonymous with “calculate”; “Bile”, which is used to say “that can”; and the suffix “-dad”, which indicates “quality”.
• Administrative, also emanates from Latin. Specifically, it is a derivation of “administrativus”, which came to mean “relative to the leadership”. It is a word that is made up of the following parts: the prefix “ad-“, which indicates “towards”; the word “minister”, which is synonymous with “servant”; and the suffix “-ivo”, which is used to show “a passive or active relationship”.
The science and technique whose objective is to provide information for making economic decisions is called accounting. Accountants study the assets of companies, entities or people and reflect the results in an accounting or financial statement.
Administrative, on the other hand, is an adjective that refers to what belongs to or related to the administration. This concept (management) is linked to the operation, structure and performance of an organization.
The type of accounting that focuses on the informational needs of the various administrative levels is known as administrative accounting. This accounting seeks to generate internal reports so that the entity’s administration can develop efficiently.
In addition to all the above, it is necessary to establish another series of hallmarks of administrative accounting:
• It provides information both internal and external to the company.
• It is carried out fundamentally so that the owners or managers of the company in question can make decisions in the most efficient and effective way possible. Hence, the reports that are prepared in this regard are required to be quick, concise and detailed.
• It is highly focused on details related to the different departments that shape an entity, inventories, the equipment that is owned, the activities of the different areas…
• It is based on a great variety of information as well as, for Of course, in the accounting data.
The company’s accountant is in charge of designing, carrying out and presenting the administrative accounting reports. These reports do not usually go beyond the doors of the company: that is, they are only used by the managers, owners or managers of the company to evaluate the development of the business in accordance with the policies and objectives previously established.
Administrative accounting, therefore, makes it possible to compare the results of the company in the past with those obtained in the present. Various control tools are used for this. The results of the management accounting also allow planning and forecasting the future of the firm.
Unlike financial accounting, administrative accounting is not regulated by regulations or standards since its results are for internal use and are used for decision-making within an entity.