- What is management accounting?
- Characteristics of management accounting
- Objectives of management accounting
- Importance of management accounting
- Differences with financial accounting
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 a branch of accounting dedicated to the administration of Business Y organizations. Its function is to supply the management of accounting information that serves for better management and decision-making.
It is a form of accounting focused solely on the utility of your information. Next to the financial Accounting and the cost accounting, constitutes the accounting structure of a company or organization.
This type of accounting It is usually for internal consumption of the company. Their reports, designed and prepared by the organisation's accountant, contain key information on the administrative performance of the organization, which will allow the administrators or managers know how close to their objectives find and apply tools or dynamics of control.
Starting in the 1960s, management accounting began to gain popularity in the business world, not so much as an instrument for analyzing costs, but rather as a mechanism to contribute to better administrative management.
Characteristics of management accounting
Administrative accounting is interested, in its reports, for historical information of the company, performance estimates and other confidential data that serve to reflect the operation of the organization.
This means that you have objective information, such as performance measurements, and subjective information, such as future projections. The latter is key in the decision making Y ventures.
For the same reason, it is not necessary to make the reports of this accounting branch following the strict guidelines of general accounting, since they are not intended for any external auditing entity, but for the consumption of the company's management.
In the same way, these reports can be made periodically, to maintain vigilance on the effect of certain measures taken, or sporadically, when requested by the management. And they can also contemplate the data of the organization as a whole, or of a limited sector of it, depending on the interest of the applicants.
Objectives of management accounting
The main objective of management accounting is to identify, measure, accumulate, analyze, prepare, interpret and communicate administrative information that allows the organization's management to make decisions in a more informed way and, therefore, more efficient.
It is one of the most important mechanisms of feedback management that the management has, and for that very reason its mission is to provide the necessary information to develop a competitive advantage in its market niche.
Importance of management accounting
Good administrative accounting translates into more and more accurate information regarding the performance of the company and what can be expected of 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 undertake risks. It is, therefore, a form of accounting designed from the needs of the management itself.
Differences with financial accounting
Financial accounting consists of collecting quantitative information of an economic nature from a company. It differs from the administrative accounting of which we have been talking, in that the first 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 is of an objective, strict nature, while the second has a certain subjective nature that helps management to make decisions.