MEANING OF HUMAN RESOURCE ACCOUNTING

 

MEANING OF HUMAN RESOURCE ACCOUNTING


MEANING AND DEFINITION OF HUMAN RESOURCE ACCOUNTING


In the changed environment of rapid technological advances, information technology revolution, intensified global competition, deregulation and emerging challenges of social and politico-economic circumstances, competent, motivated and committed personnel are assets for the growth of any organization. In fact, the very success or failure of an organization depends on the quality and performance of the employees. Naturally, such competent and committed human resources can be procured only at a cost to the organization. 


The traditional accounting system does not indicate the true and realistic value of this important asset of the organization, on any particular date, say date of the balance sheet of the organisation. The traditional financial and cost accounting system is also unable to indicate whether the value of this human asset is increasing, decreasing or is constant and the typical balance sheet does not indicate the value of this asset at all. The expenses incurred on recruitment, training, familiarization and development of employees are charged to the current year's revenues and therefore violate the accounting principle of 'accrual', Economists are of the view that expenses incurred on human resources are fixed costs, which do not render immediate return and should therefore be capitalized and amortised over the entire period. To that extent, the accounting personnel are concealing assets and net worth of the organization.


Definition of Human Resource Accounting (HRA)


"Human resource accounting is the process of identifying and measuring data about human resources and communicating this information to interested parties."

American Accounting Association,


Thus 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.



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