HUMAN RESOURCE ACCOUNTING – AN OVERVIEW:

An enterprise, until recent, is valued on the basis of traditional balance sheet method which takes into account plant, machinery and building as sufficient reflection of its assets. But the emergence of modern economy has put questions on this traditional method of valuation due to increasing importance of human resource as a part of enterprise’s total value.

So, human resource accounting is a relatively new term defined as a process to identify, measure and communicates all the important information related to human resource of an enterprise as it helps in facilitating effective management within the organization.

OBJECTIVES OF HUMAN RESOURCE ACCOUNTING:

The main objectives of human resource accounting involve the following points:

1. HRA helps in determining that whether the human resource has been utilized well or not.
2. It helps in determining the worth of human resource to the organization as well as to the society.
3. It helps in planning policies regarding human resource development.
4. It provides valuable information about the human resource and also assist in taking important decisions regarding them.

SIGNIFICANCE OF HUMAN RESOURCE ACCOUNTING:

Human resource accounting, no doubt is an important concept of accounting having the following merits or advantages:

1.    SOURCE OF MOTIVATION:

Human resource, being the most important resource of an organization, plays a vital role in the achievement of organizational goals. When the efforts of human resource are accounted for, they will get motivated and encouraged to give the best out of them.

2.    PROPER INTERPRETATION OF FINANCIAL STATEMENT:

Human resource accounting takes into account the most valuable resource of the organization i.e. human resource as part of financial assets while making valuation of an enterprise. Hence provides  a true and fair view of financial statement .

3.    BETTER ORGANIZATIONAL RELATIONS:

Human resource accounting encourages the employees to give their best performance as their performance is regularly measured. It ultimately improves the organizational relation between employees and employers and solves their conflicts.

4.    OVERALL GROWTH & DEVELOPMENT:

HRA helps in boosting employee’s productivity on one hand and compare the actual figures with the standard figures to find out the variation and take necessary steps to remove those deviations on the other hand. Hence in this way the total expenditure will decrease and overall profitability will improves.

5.    BETTER DECISION MAKING:

Human resource accounting also assists in taking important decisions regarding manpower planning and controlling, their recruitment and selection, training programs and most importantly provides effective measurement and communicating reports for decision making.