ADMINISTRATIVE ACCOUNTING Meaning and
Definition
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Administrative accounting refers to the process of collecting, analyzing, and interpreting financial information to help decision-makers within an organization make informed choices and effectively manage its administrative functions. It is a specialized branch of accounting that focuses on providing information and support to internal users rather than external parties such as investors or creditors.
The purpose of administrative accounting is to assist managers in planning, controlling, and evaluating the performance of the organization. This involves activities such as budgeting, cost analysis, performance measurement, and strategic planning. Administrative accountants use various tools and techniques to gather and analyze financial data, including financial statements, reports, and performance indicators.
The information provided by administrative accounting is used to ensure the optimal allocation of resources, enhance cost efficiency, monitor and control financial operations, and contribute to the achievement of the organization's goals. It helps managers make informed decisions regarding the allocation of budgets, evaluation of investments, pricing decisions, and improvement of operational processes.
Furthermore, administrative accounting plays a vital role in internal control by identifying and preventing fraudulent activities, monitoring compliance with internal policies and procedures, and providing accurate, reliable, and relevant financial information to support decision-making processes.
In summary, administrative accounting focuses on providing financial information and analysis within an organization to support managerial decision-making and improve administrative functions. It is a critical tool for optimizing resources, achieving cost efficiency, and ensuring effective management of the organization's operations.
Etymology of ADMINISTRATIVE ACCOUNTING
The word "administrative" comes from the Latin word "administrativus", which is derived from the verb "administrare". "Administrare" consists of the prefix "ad", meaning "to" or "towards", and "ministrare", meaning "to manage" or "to serve". Thus, "administrative" refers to the activities related to managing or serving.
The term "accounting" has its roots in the Latin word "computare", which means "to calculate" or "to reckon". Over time, "computare" evolved into "accountare", where "ratio" (meaning "reckoning" or "calculation") was added as a suffix. Eventually, "accountare" evolved into "accounting", referring to the process of calculating, recording, and analyzing financial transactions.
