Human resource accounting is the process of measuring and
reporting the human resources of an organisation. It is the process of
providing information about individuals and groups of individuals, within an
organisation to decision-makers both inside and outside the organisation. The
American Accounting Association’s Committee on Human Resource Accounting (1973)
defines HRA as “the process of identifying and measuring data about human
resources and communicating this information to interested parties”. According
to Flamholtz. “Human resource accounting may be defined as the measurement and
reporting of the cost and value of people as organizational resources. It
involves accounting for investments in people and their replacement cost. It
also involves accounting for the economic value of people to an organisation.”
According Davidson and Weil "it is the process of measuring and reporting
the human dynamics of an organisation. It is the assessment of the condition of
human resources within an organisation and the measurement of the change in the
condition through time.”
According to the above definitions, the requirements of
HRA are as follows:
- Valuation of human resources.
- Recording of human resources as per accounting principles.
- Disclosure of human resource information in the financial statements.
HRA is the measurement of cost value of people for
organisation. HRA is the systematic recording of the transactions relating the
value of human resource. The importance of people in the organisation as
productive resource was ignored by the management, but now a days it has
received increasing attention and widespread interest in developing the system
of HRA. The productivity of a company's investment is known for the rate of
return, which is calculated on the basis of physical assets investment only.
There is need to find out productivity of investment on human beings in any
organisation. It is an effective tool for decision making. Human resources have
certain distinct characteristics from the physical assets like personality,
self control, devotion, quality, skill, talent, loyalty, initiative ness etc.
It is a basic need of present time to improve productivity, that can be
improved by the human force. Hence to encourage, it is necessary to account
them and to take progressive decisions for them.
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