What Is Administrative Accounting?
Administrative accounting handles and reports internal factors and figures that influence decision making, operational control, and managerial planning. Administrative accounting is often performed by an administrative accountant, who may help a company with internal operational accounting duties like payroll, taxes, and management of company assets. Administrative accounting focuses on management planning and control to accomplish the company's administrative goals.
- Administrative accounting is the factors and processes in place to handle managerial planning and operations.
- Administrative accountants handle administrative accounting functions, such as payroll and taxes. An administrative accountant may also be the bookkeeper.
- While financial accounting deals with focuses on the entire business, administrative accounting generally focuses on a certain process within the company.
How Administrative Accounting Works
Administrative accounting, a subset of managerial accounting, involves a formal methodology for gathering, reporting, and evaluating financial data that deals with management planning and control. The reports can help administrators and managers evaluate the day-to-day activities of the operation.
Administrative accounting duties are often carried out by an administrative accountant who is an employee of the company. The administrative accountant is often in charge of things like bookkeeping, payroll, management of company assets, tax preparation and planning, inventory control and corporate budgeting.
Administrative accountants help businesses manage financial tasks and expenditures. They do so by creating reports. These reports are run on a daily basis, helping management maintain and control operations. While accountants put together financial statements, administrative accountants handle other functions, such as bookkeeping and budgeting.
The position falls somewhere between the human resource department and the finance division. Some key functions might include processing payments, reconciling vendor accounts, processing credit applications for vendors, preparing 1099 forms, and assisting auditors.
Administrative Accounting vs. Financial Accounting
Administrative accounting, which is a subset of managerial accounting focuses on business transactions. Financial accounting, more broadly, is the aggregation of data into financial statements. Financial accounting tends to cover an entire business, while administrative accounting is more focused on details or more granular levels, such as product lines.
As well, financial accounting has standards it must comply with, such as Generally Accepted Accounting Principles (GAAP), while administrative accounting does not. Certified Public Accountants is a popular designation found in financial accounting. Meanwhile, the Certified Management Accountant designation is generally held by those in managerial accounting.
Pay levels are higher for financial accounting professions, in part, because there are more training requirements for financial accountants.
Example of Administrative Accounting
Tanya is an administrative accountant at the ABC Company. She’s in charge of payroll, which means making sure the appropriate taxes, defined contribution plan contributions, and insurance costs are deducted from paychecks and the paychecks are deposited properly into employee accounts.
Tanya is also the corporate bookkeeper, keeping track of expenses and revenues. She also is on the budget committee and is in charge of designing the yearly budget for each department and making sure the departments get access to their budgeted funds.