What is Administrative Accounting?

Definition of Administrative Accounting

Internal factors and statistics that influence decision-making, operational control, and managerial planning are handled and reported by administrative accounting.

A company's administrative aim is usually the responsibility of an administrative accountant. These specialists are responsible for managing and recording incomings and outgoings, as well as supporting organizations with internal operational accounting tasks such as payroll, taxes, and asset management.

TAKEAWAYS IMPORTANT

• The components and processes in place to handle managerial planning and operations are referred to as administrative accounting.
• Administrative accountants are responsible for administrative accounting activities such as payroll and taxes, and they may also serve as bookkeepers.
• Administrative accounting focuses on a specific process within the organization, whereas financial accounting focuses on the overall corporation.

What is the Process of Administrative Accounting?

Administrative accounting is a subset of managerial accounting that deals with management planning and control and incorporates a structured methodology for acquiring, reporting, and assessing financial data.

Administrative accounting tasks are frequently performed by a firm employee who is also an administrative accountant. These professionals are typically in charge of bookkeeping, payroll, asset management, tax planning and preparation, inventory control, and corporate budgeting.

Accounting administrative assistants assist firms in managing their financial activities and expenditures. They accomplish this by generating reports. These reports are generated on a regular basis to aid management and administrators in evaluating daily activities as well as maintaining and controlling operations.

Administrative accountants undertake duties such as bookkeeping and budgeting in addition to preparing financial statements. The role is located between the human resources and finance departments. Processing payments, balancing vendor accounts, processing credit applications for vendors, creating 1099 forms, and supporting auditors are all examples of crucial functions.

Difference between Administrative Accounting & Financial Accounting

Business transactions are the focus of administrative accounting. The gathering of data into financial statements is referred to as financial accounting. Financial accounting is more focused on details or granular levels, such as product lines, whereas administrative accounting is more focused on details or granular levels, such as product lines.

Financial accounting, on the other hand, is bound by rules such as Generally Accepted Accounting Principles (GAAP), whereas administrative accounting is not. CPAs (Certified Public Accountants) are a well-known credential in financial accounting. Meanwhile, professionals in management accounting typically hold the Certified Management Accountant (CMA) designation.

Pay is also greater for financial accounting professions, owing to the fact that financial accountants must complete more training.

Example for Administrative Accounting

Rahul works with XYZ Company as an administrative accountant. He is in charge of payroll, which includes ensuring that the right taxes, defined contribution (DC) plan payments, and insurance costs are taken from paychecks and that they are deposited into employee accounts correctly.

Rahul is also the corporate bookkeeper, keeping track of expenses and revenues, as well as a member of the budget committee, where he is in charge of establishing each department's annual budget and ensuring that the departments have access to their budgeted monies.