What is Administrative Accounting?

Administrative accounting involves the collection of performance information and the generation of reports from this information that assist management in running an organization. The reports are used on a daily basis to maintain control over and optimize operations. The reports tend to have quite a granular focus within an organization, so that managers can use the resulting information to make highly-targeted decisions to improve company performance. An example of an administrative accounting report appears in the following exhibit; it shows the main clusters of expenses for a group of retail stores, and notes the margin being earned on each one. Management would use this report to upgrade the practices at individual stores, as well as to decide whether a store location should be closed.