HR ACCOUNTING

Presented by Sidharth r 11hm30

DEFINITION :

Human Resource Accounting : is the process of identifying and measuring data about investments made in Human Resource and reporting this information to the interested parties. A term used to quantify the cost and value of employees of their employing organization.

IMPORTANCE OF HR ACCOUNTING
Human Resource Accounting provides useful information to the management, financial analysts and employees as stated below:

helps the management in Employment and utilization of Resources. helps in deciding transfers, promotion, training and retrenchment of human resources provides a basis for the planning of physical assets helps in evaluating the expenditure incurred for imparting further education and training of employees in terms of the benefits derived by the firm.

IMPORTANCE OF HRA ( contd.)

helps to identify the causes of high labour turnover at various levels and taking preventive measures to contain it. helps in locating the real cause for low return on investment, like improper or under-utilization of physical assets or human resources or both helps in understanding and assessing the inner strength of an organization and helps the management to steer the company well through the most averse and unfavorable circumstances. provides valuable information for persons interested in making long term investments in the firm.

OBJECTIVE:
AIM : is to depict the potential of the employees in monetary terms. This concept can be examined from 2 directions i.e.

Cost of Human Resource :- the expenditure incurred for recruiting, staffing and training the quality of the employees and Value of Human Resources :- the yield which the above investment can yield in the future.

Methods of HRA

Actual Cost Method, Replacement Cost Method, Standard Cost method, etc.

Advantages of HRA
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Information for manpower planning Information for making personnel policies Utilization of human resources Proper placements Increases morale and motivation Attracts best human resources Designing training and development programs Valuable information to investors

Limitations of HRA

The valuation of human assets is based on the assumption that the employees are going to remain with the organization for a specified period. However, this assumption is wrong because employee mobility is very high. may lead to the dehumanization in the organization. If the valuation is not done correctly or the results of the valuation are not used properly.

In the case of financial accounting, there are certain specified accounting standards which every organization must follow. However, there are no standards for HRA. Each organization has its own standards for HRA. So the HRA of two organizations cannot be compared.
There are no specific and clear cut guidelines for 'cost' and 'value' of human resources of an organization. The present valuation systems have many limitations. The life of a human being is uncertain. So its value is also uncertain.

Position of HRA in India

In India, very few companies use HRA. Not so important in India. Infosys Technologies and BPL-leading companies reports give useful information to the company management, employees and investors