Human Resource Accounting

Submitted By :Gaurav ( 12020241078)Isha Gupta ( 12020241079)

Introduction Objectives of HRA Importance of HRA Limitations Cost of Human Resources Measurements in HRA Cost Approach

Contents

Process of identifying and measuring data about

human resources and communicating this information to interested parties

Quantification of the economic value of the people in an organization

Measurement and reporting of the cost and value of people in organizational resources : Flamholtz

Art of valuing, recording and presenting systematically the worth of human resources in the books of account of an organization

Introduction

1. Valuation of human resources2. Recording the valuation in the books of

account3. Disclosure of the information in the financial

statements of the business

Contd…

Improve management by analyzing

investment in HR  Consider people as its asset  Attract and retain qualified people Profile the organization in financial terms To have an analysis of the human asset To aid in the development of management

principles, and proper decision making for the future

Objectives

Furnishes cost/value information for making management decisions

about acquiring, allocating, developing, and maintaining human resources in order to attain cost-effectiveness

Helps the management in the employment, locating and utilization of human resources

  Helps in deciding the transfers, promotion, training and retrenchment

of human resources

Assists in evaluating the expenditure incurred for imparting further education and training in employees in terms of the benefits derived by the firm

 

Importance of HRA

Management tool designed to assist senior management

in understanding the long term cost and benefit implications of their HR decisions

Helps in identifying the causes of high labour turnover at various levels and taking preventive measures to contain it

Helps in identifying improper or under-utilization of physical assets or human resource or both

Provides valuable information for persons interested in making long term investment in the firm

Contd…

No specific procedure for finding cost and

value of human resources of an organization  Form and manner of including HRA value in

the financial statement is not clear Employee with a comparatively low value may

feel discouraged Tax laws do not recognize human beings as

assets

Limitations

Cost of Human

Resources

Acquisition cost

-Recruitment Cost-Selection Cost-Placement Cost -Campus Interview Cost

Training (Development) cost

-Formal Training Cost -On the Job Training Cost-Special Training-Development Programmes

Welfare Cost -Medical Expenditure -Canteen Expenditure-Specific and General Allowances-Children Welfare Expenses-Other Welfare Expenditure

Other Costs -Safety Expenditure-Ex-gratia-Multi-trade incentives-Rewarding Suggestions

Measurements in HRA

• Historical Cost• Replacement Cost• Opportunity Cost• Standard Cost

Cost based approaches:

• The Lev and Schwartz Model (Present value of future earnings method)• The Eric Flamholtz Model (Reward Valuation method)• Morse Model (Net Benefit Model)

Monetary value based approaches:

• Likert Model• The Flamholtz Model• Ogan Model (Certainity Equivalent Net Benefit Model)

Non- monetary value -based approaches:

Cost

It is a sacrifice incurred to obtain some anticipated benefit or service

Two portions :

ExpenseAsset

COST APPROACH

Historical cost Sacrifice that was made to acquire and develop the resource

Opportunity cost Money to be spent on HR was spent on something else

Replacement cost Cost incurred in the replacement of present employees

Types of Cost