The document discusses human resource accounting. It defines human resource accounting as measuring and quantifying investments in an organization's human resources. The objectives of human resource accounting are to provide cost and value information about human resources to help manage them effectively. Methods of valuing human resources include historical cost and replacement cost. The document outlines advantages like better decision making but also limitations like difficulties in estimating replacement costs.
The document discusses human resource accounting. It defines human resource accounting as measuring and quantifying investments in an organization's human resources. The objectives of human resource accounting are to provide cost and value information about human resources to help manage them effectively. Methods of valuing human resources include historical cost and replacement cost. The document outlines advantages like better decision making but also limitations like difficulties in estimating replacement costs.
The document discusses human resource accounting. It defines human resource accounting as measuring and quantifying investments in an organization's human resources. The objectives of human resource accounting are to provide cost and value information about human resources to help manage them effectively. Methods of valuing human resources include historical cost and replacement cost. The document outlines advantages like better decision making but also limitations like difficulties in estimating replacement costs.
The document discusses human resource accounting. It defines human resource accounting as measuring and quantifying investments in an organization's human resources. The objectives of human resource accounting are to provide cost and value information about human resources to help manage them effectively. Methods of valuing human resources include historical cost and replacement cost. The document outlines advantages like better decision making but also limitations like difficulties in estimating replacement costs.
Flow of presentation Introduction Of Human Resource Accounting Definition Of Human Resource Accounting Objectives Of Human Resource Accounting Advantages Of Human Resource Accounting Limitation Of Human Resource Accounting Human Resource Costs Methods Of Human Resource Accounting Conclusion Bibliography
Introduction of HRA “ one asset is omitted and its worth I want to know, That asset is the value of men who run the show.”
That the value of men (human resources) is not
measured and reflected in the accounts of business enterprise. Although the success of the business to a greater extent depends upon the abilities, efficiencies and power of these people who actually run the business.
HRA may be considered as such an accounting system which recognizes the human resources as an asset and records it is the books of account after measuring its value in the same way as other physical resources. Such accounting may generate and present valuable and significant information relating to human resources.
Employees are the greatest assets of an
organization and its success or failure depends on the quality and performance of the employees. But traditional accounting systems fail to indicate the value of the most valuable asset. [email protected] BY: MANISHA VAGHELA 4 Definition of HRA
“ HRA is an attempt to identify and report
investments made in human resource of an organization. Basically it is an information system that tells the management what changes over time are occurring to human resources of the business.”
Objectives of HRA 1) Provide cost value information about acquisition, development, allocation and maintenance of human resources so as to achieve organizational goals in effective manner. 2) Enable management of the organization to effectively monitor the use of human resources. 3) Increased managerial awareness of the value of human resources. 4) Better decisions about people, based on improved information system.
5) Accountability on the part of management for its human resources. 6) Developing new measures of effective manpower utilization. 7) Enabling a longer time horizon for planning and budgeting. 8) Better human resource planning.
Advantages of HRA 1) Information for manpower planning 2) Information for making personnel policies 3) Utilization of human resources 4) Proper placements 5) Increases morale and motivation 6) Attracts best human resources 7) Designing training and development programmers' 8) Valuable information to investors
Limitations of HRA 1) The valuation of human assets is based on the assumption that the employees are going to remain with the organization for a specified period. However, this assumption is wrong because employee mobility is very high.
2) The human resource accounting may lead to the
dehumanization in the organization. If the valuation is not done correctly or the results of the valuation are not used properly.
3) In the case of financial accounting, there are certain specified accounting standards which every organization must follow. However, there are no standards for HRA. Each organization has its own standards for HRA. So, there are no uniform standards for HRA. Therefore, the HRA of two organizations cannot be compared.
4) There are no specific and clear cut guidelines for 'cost'
and 'value' of human resources of an organization. The present valuation systems have many limitations.
Historical cost method This method was developed by Rensis Likert.
Historical cost method also called Actual cost method.
Two types of costs -
(a) Acquisition cost (b) Learning cost
(a) Acquisition cost : Acquisition cost refers to the
expense incurred on recruitment, selection, and placement. [email protected] BY: MANISHA VAGHELA 16 (b) Learning cost: Learning cost refer to expenses incurred on training and development.
Under this method, the cost of acquisition i.e.
selection, hiring, training costs of employees are capitalized and written off over the expected useful life of the employees. In case, the personnel leave the company before the anticipated period of service, then the unamortized portion of costs remaining in the company’s books is written off against the profit and loss account in that year. If the period of service exceeds the anticipated time, then amortization of costs is rescheduled.
This approach was first suggested by Rensis Likert,
and was developed by Eric G. Flamholtz on the basis of concept of replacement cost.
Under this method, replacement cost refers to the cost
of replacing an existing employee. Replacing cost is the cost that would cost to replace the existing human resources with human resources capable of rendering equivalent services. Here, the underlying costs included
in replacement cost are the cost of recruitment, training and development, opportunity cost for the intervening period till the new recruit attains the efficiency level equal to that of the old employee.
According to Likert (1985) replacement cost include
recruitment, selection, compensation, and training cost (including the income foregone during the training period). The data derived from this method could be useful in deciding whether to dismiss or replace the staff.
Human resource costs Costs incurred on locating, selecting and training employees are the capital component of investment in human resources. These are similar to the costs of fixed assets, e.g. purchase price and cost of installation. various types of human resource costs Recruitment costs Selection costs Hiring and placement costs Orientation costs Training costs Development costs [email protected] BY: MANISHA VAGHELA 28 • Recruitment costs:
The costs are incurred to identify
the possible sources of employees, e.g. , advertising, travel, fees of employment, agency, company’s recruitment, etc.
employee’s capabilities beyond immediate skills required for the job, advancement, e.g. , fees and expenses for attending seminars and executive development programmes.
[email protected] BY: MANISHA VAGHELA 40 Review of presentation Introduction of HRA Definition of HRA Objectives of HRA Advantages of HRA Limitation of HRA Human resource costs Method of HRA
Conclusion So, from the above presentation we can easily understood human resource cost related to historical and replacement method.
Human resource cost includes Recruitment costs,
Selection costs, Hiring and placement costs, Orientation costs, Training costs, Development costs. Also measuring the employee and achieve organisation goal.
Questions What is definition of HRA ? How many cost of Human resource cost ? HRA is part of HRM ? - Yes/No What is Historical cost method ? HRA Method useful in organization ?
