HR Accounting notes | Humar Resource Accounting Notes

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Human Resources Accounting: The various attempts to state the value of people in the language of accounting and to represent this value in an organization’s financial statement is referred to as human resource accounting. This can be defined as the process of identifying, quantifying, accounting and forecasting the value of human resources in order to facilitate effective HRM. HRA has contributed to the view of people as being an expense to be minimized and cut when necessary. This view underrates the value of people in terms of intellectual capital. People therefore have a cost which is greater than the cost of their employment  No generally accepted accounting procedures for employee valuation. The 1st major attempt at employee valuation was made by R.G. Barry Corporation of Columbus in their 1967 annual report. This attempt has been described as a 1st step in developing sophisticated measurement and accounting procedures to enable the company to report accurate estimates of the worth of the organization’s human assets. Objectives: 1.To provide cost value data for managerial decisions regarding acquiring, developing, allocating & maintaining HR. 2.Monitor effectiveness of HR utilization. 3.Determining status of human assets. 4.Development of effective HRM practices by classifying the financial consequences of these practices. Methods of Human Resource Accounting: III. Standard cost: Based on the hierarchical position employees are categorized into different groups. Standard cost is fixed for each category of employees & their value is calculated. IV. Present Value of Future Earnings: The future earnings of various groups of employees are estimated up to the age of their retirement & are discounted at a predetermined rate to obtain the present value of their earnings.The contribution can be measured by its cost or by the wages the organization will pay the employee. V. Expected realizable value: Assumption no direct r/s b/w cost incurred on an individual & his value to the organization at a particular point of time. An individual’s value to the organization can be defined as the present worth of the set of future services that he is expected to provide during the period he remains in the organization. for any quarry contact myrogation@gmail.com or comment