ADVANTAGES OF HUMAN RESOURCE ACCOUNTING

 

ADVANTAGES OF HUMAN RESOURCE ACCOUNTING


MEANING OF HUMAN RESOURCE ACCOUNTING


Human Resource Accounting is the measurement and reporting of the costs incurred to recruit, hire, train and develop employees and their present value to the organization. HRA'S basic purpose is to facilitate the effective and efficient management of human resources, keeping the cost factor in view


ADVANTAGES OF HUMAN RESOURCE ACCOUNTING


1. Human resource accounting provides information to the management about the cost of human resources acquired, their development and maintenance, which in turn enables the management to take the right decisions on recruitment/promotion, transfer/retrenchment/retention etc.


2. Human resource accounting helps in controlling labour costs and thus improves profitability, as it provides information about the utility of cost reduction, budgetary control programmes and impact on human relations.


3. Human resource accounting facilitates the evaluation of the effectiveness of management's human resource policies.   In case recruitment and training is proving costly, management can change its policies for reducing labour turnover. Human resource accounting also provides information about the adequacy of return on investment in human resources.


4. It provides valuable information to the management in human resource planning by highlighting the strength and weaknesses of the workforce. Adequacy or shortfall of human resources can also be judged.


5. Modern investors want to know the value of an organisation's human assets. HRA provides this information to the present as well as prospective investors in the organisation. Although the value of human assets is not reflected in the balance sheet, the information about the value of human resources enables present and prospective investors to further invest in the organization. HRA provides accurate accounting of return on total resources employed in an organization.



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