Human Resource Accounting

Meaning: Human resources are considered as an important asset and are different from the physical assets. Physical assets do not have feelings and emotions, whereas human assets are subjected to various types of feelings and emotions. In the same way, unlike physical assets human assets never get depreciated.

Therefore, the valuations of human resources along with other assets are also required in order to find out the total cost of an organization. In 1960s, Rensis Likert along with other social researchers made an attempt to define the concept of human resource accounting (HRA).

DEFINITION:

The American Association of Accountants (AAA) defines HRA as:

                   “HRA is a process of identifying and measuring data about human resources and communicating this information to interested parties”

              From the analysis of above definitions, it is clear that the human resource may be seen as the most fundamental of all available resources to an organization. Corporations cannot run by machines alone.

Objectives of HRA:

Rensis Likert described the following objectives of HRA:

1. Providing cost value information about acquiring, developing, allocating and maintaining human resources.

2. Enabling management to monitor the use of human resources.

3. Finding depreciation or appreciation among human resources.

4. Assisting in developing effective management practices.

5. Increasing managerial awareness of the value of human resources.

6. for better human resource planning.

7. for better decisions about people, based on improved information system.

8. Assisting in effective utilization of manpower.