The word Atman is derived from the root Ad which means to pervade (Ad vyApane). Atman thus means the invisible reality or substance that pervades the individuated visible forms, just as gold is the substance that pervades the visible form of an ornament. This visible form in the case of living beings includes in it the physical phenomenon called body as well as the phenomenon known as the soul.
From Karma and Reincarnation, Swami Muni Naryanana Prasad, D.K. Printworld (P) Ltd., 1993, ISBN 81-246-0022-8. Buy from Amazon US, Buy from Amazon UK