We explain what administrative accounting is, its objectives, its importance for a company and other characteristics.
What is management accounting?
Administrative accounting or managerial accounting is called branch of accounting dedicated to the administration of companies and organizations. Its function is to supply their management with accounting information that serves for better management and decision making.
It is a form of accounting focused solely on the usefulness of your information. Together with financial accounting and cost accounting, it constitutes the accounting structure of a company or organization.
This type of accounting It is usually for internal consumption of the company. Its reports, designed and prepared by the organization's accountant, contain key information about the organization's administrative performance, which will allow administrators or managers to know how close they are to their objectives and apply control tools or dynamics.
Starting in the 1960s, administrative accounting began to gain popularity in the business world, not so much as a cost analysis instrument, but as a mechanism to contribute to better administrative management.
Features of management accounting
Management accounting is interested, in its reports, in historical information about the company, performance estimates and other confidential data that serve to reflect the functioning of the organization.
This means that It has objective information, such as performance measurements, and subjective information, such as future projections. The latter is key in decision-making and undertakings.
For that same reason, it is not necessary to prepare the reports of this accounting branch following the strict guidelines of general accounting, since they are not intended for any external auditing entity, but rather for the company's management's own consumption.
Likewise, these reports can be done periodically to maintain surveillance on the effect of certain measures taken, or sporadically when requested by the administration. And they can also consider data from the organization as a whole, or from a limited sector of it, depending on the interest of the applicants.
Objectives of management accounting
The main objective of management accounting is identify, measure, accumulate, analyze, prepare, interpret and communicate information administrative that allows the organization's management to make decisions in a more informed and, therefore, more efficient manner.
It is one of the most important business feedback mechanisms that management has, and for this reason its task is to provide the information necessary to develop a competitive advantage in your market niche.
Importance of management accounting
Good administrative accounting results in greater and more faithful information regarding the company's performance and what can be expected from it in the immediate future, always speaking in accounting terms.
This means that, unlike other forms of accounting, it is not simply a detail of numbers and measurements, but also a predictive tool which serves to anticipate opportunities and take risks. It is, therefore, a form of accounting designed based on the needs of management itself.
Differences with financial accounting
financial accounting It consists of collecting quantitative information of an economic nature about a company. It differs from the administrative accounting of which we have been talking, in that the first It is intended for people outside the organization but linked to it in one way or another.
On the contrary, administrative accounting is strictly for internal consumption. For the same reason, the first It is objective, strict in nature while the second has a certain subjective nature that helps management make decisions.
Continue with: Financial accounting
References
- “What is management accounting?” in Web and Business.
- “Types of accounting” on Wikipedia.
- “What is management accounting?” in Gestiopolis.
- “Difference between administrative and financial accounting” in Accounting Practices (blog).
- “Characteristics of administrative accounting” in Factufácil.
