HR Accounting

presentation on human resource accounting including accounting fundamentals and basic concepts for beginners as well as for experts.

1. HUMAN RESOURCE ACCOUNTING Azad khan

2. Definition Of Human Resource Accounting: American Accounting Associati on (1980) has defined human resource accounting as follows: “Human resource accounting is the process of identifying and measuring data about human resources and communicating this information to interested parties” According to Flameouts , “Human resources accounting is the measurement of costs and value of the people for the organization”

3. Characteristics Of HR Accounting It is a system of accounting of HR It involves measurement of cost and value of human resources is made. In involves recording the valuation of human resources in the books of accounts. It involves disclosure of the information in the financial statement of an organisation for communication.

4. Objectives Of HR Accounting: To facilitate effective and efficient management within an organization for human resources. To provide information of changes in the structure of manpower to the management. To provide basis to the future investors in making better decisions about investment in human resources. To provide qualitative information on human resources. To measure the costs incurred on human resources by firms.

5. To evaluate the return on investment on human capital. To communicate the organization and the public at large about the worth of human resources of an organization. To know whether the human resources have been properly utilized and allocated. To help the persons interested in the human resources are giving a return equivalent to their worth or not. To help in development of Management principles by clarifying the financial consequences of the various practices

6. Methods of Human Resource Accounting: 1. Historical cost method, 2. Replacement cost method, 3. Opportunity cost method, 4. Capitalization of salary method, 5. Economic valuation method, 6. Return on efforts employed method, 7. Adjusted discounted future wags method, 8. Reward valuation method.

7. Need and Importance: 1. It develops effective managerial decision making. 2. It enhances the quality of management. 3. It prevents misuse of human resources. 4. It helps the efficient allocation of resources. 5. It increases human asset productivity. 6. It improves their morale, cooperation, job satisfaction and creativity.

8. 7.It develops human efficiency. 8.It influences the individual behavior, attitude and thinking in desired direction 9. It helps in long term investment decisions. 10.It provides good basis of human asset control. 11.It helps the development of management principles. 12.It ensures good monitoring of effective uses of human resources.

9. Advantages of Human Resource Accounting: 1. Helps in Planning & executing HR policies, 2. Motivates Employees, 3. Indicator of the Health of the Enterprise, 4. Decision about Further Recruitment, 5. Helps in calculating ROI, 6. Save executive time in meetings, 7. Improves decision making process, 8. Judgment of negative effects of the programme .

10. Disadvantages Of HR Accounting: No availability of standard Opposition of trade union Expenditure on HRA Variety of method create confusion Uncertainty about continuance of employees Lack of perfect knowledge about future earning of HR

11. Limitations: 1. “There is no proper clear-cut and specific procedure or guidelines for finding cost and value of human resources of an organization. 2. The period of existence of human resource is uncertain and hence valuing them under uncertainty in future seems to be unrealistic. 3. There is no universally accepted method of human asset valuation.

12. References Human Resource Accounting on Scribd What is Human Resource Accounting by CharteredClub Human resource accounting - interests and conflicts, CEDEFOP Accounting for People: Taskforce and Beyond The Pacioli Institute for intellectual capital accounting and financial reporting