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Principles Of Management Essay

1576 words - 7 pages

Human Resource Accounting

Human Resource Accounting is the process of assigning, budgeting, and reporting the cost of human resources incurred in an organization, including wages and salaries and training expenses.

Human Resource Accounting is the activity of knowing the cost invested for employees towards their recruitment, training them, payment of salaries & other benefits paid and in return knowing their contribution to organisation towards it's profitability.

Contemporary Issues

•Human Resource Audit
◦Objectives and benefits of Human Resource Auditing
◦Human Resource Auditing Process
•Human Resource Accounting
◦Methods of Human Resource Accounting
•Human Resource ...view middle of the document...

But now a day this concept has changed and the cost incurred on any asset (as human resources) should be capitalised as it yields benefits measurable in monetary terms.

Human Resource Accounting means accounting for people as the organisational resources. It is the measurement of the cost and value of people to organisations. It involves measuring costs incurred by private firms and public sectors to recruit, select, hire, train and develop employees and judge their economic value to the organisation.

According to Likert (1971), HRA serves the following purposes in an organisation:
•It furnishes cost/value information for making management decisions about acquiring, allocating, developing, and maintaining human resources in order to attain cost-effectiveness;

•It allows management personnel to monitor effectively the use of human resources;
•It provides a sound and effective basis of human asset control, that is, whether the asset is appreciated, depleted or conserved;
•It helps in the development of management principles by classifying the financial consequences of various practices.

Meaning

Human resource accounting is an attempt to identify and report investments made in the human resources of an organisation that are not
presently accounted for under conventional accounting practice. Basically, it is an information system that tells the management what changes overtime are occurring to the human resources of the business, and of the cost and value of the human factor to the organisation. The system may serve both the internal and external users, providing management (internal users) with relevant data on which to base recruiting, training and other development decisions and supplying investors, lenders and other external users of financial statement with information concerning the investment in and utilisation of human resources in the organisation.

Accounting is a man-made art and its principles and procedures have been evolved over a long period to aid business in reporting for the management and public. Of the four factors of production, viz., man, money, material and land, the last three of them are amenable to conventional accounting, but the first one, i.e., the human resource has not been subject to such accounting. Over the last two decades the idea of accounting for human resources is gaining active consideration.

Much of the work on accounting for human resources focused primarily on development or validation of HRA concepts. The traditional practice of treating all expenditure on human capital formation as an immediate charge against income is not consistent with the treatment accorded to comparable outlays in physical capital. The American Accounting Association strongly critised the practice of assigning a Zero value to an asset and stated that ‘Costs should be capitalised when they are incurred in order to yield future benefits and when such benefits can be measured.’

Management of any concern...

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