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Kaushal assign.(final)


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Kaushal assign.(final)

  1. 1. Q.1 What is Human Resource Accounting? Also explain the different methodsof Human Resource Accounting.Human Resource Accounting:- Human Resource Accounting(HRA) shows theinvestment the organisation makes in its people and how their value change over a periodof time .It is similar in principle to the financial accounting. That is just as financialaccounting reflects the costs of assets such as building and machinery, human resourceaccounting implies human resources as capital not as expense. In simple words , we can say that HRA is a sophisticated way to measure theeffectiveness of personnel management activities and the use of people in an organisation.According to the AMERICAN ASSOCIATION OF ACCOUNTANTS:-“HRA is processof identifying and measuring data about human resources and communicating thisinformation to interested parties”The basic theory underlying the Human Resource Accounting is:-1)That people are available resources of an organisation/or enterprise.2)Information on investment and value of Human Resource is useful for decision making inthe organization.On the basis of above definition it can be defined as the measurement and reporting of thecost on human resources and their present value s to the organisation. The main purposeof HRA is to facilitate the effective and efficient management of human resources of anorganisation by making the information available on their acquisition, development,retention and evaluation etc. Methods of Human Resource AccountingThe accountants and finance professionals have suggested various methods for measuringthe value of human resources utilized in an organisation. These for the convenience of thereaders may be broadly classified into two categories: (1) Monetary Methods (2)Non-Monetary1. Monetary Method :These methods are best on cost of economic value of HumanResources.Under this methods human resources of an organisation are translated into a
  2. 2. common denominator.There are the seven important monetary methods for measuringhuman values in an organisation.(a) Historical Cost Method:This method is develop by Rensis Likert.Under this method allactual cost incurred on recruitment,training,familiarisation etc.are capitalized.Theadvantage of this methods is that the value of human asset can be shown on conventionalBalance Sheet and Profit and Loss Account.It is the measurement of investment that isunigonored made on individuals to check the performance that is investment of recruitmentand training and development.(b) Replacement Cost Method: The replacement cost of human resources is the cost thatwould have to be incurred if present employees are to be replaced. For instance, if anemployee were to leave today, several costs of recruiting, selection, hiring, placement,orientation, and on the job training would have to be incurred in order to replace him. Suchcosts have two dimensions- positional replacement costs or the costs incurred to replacethe services rendered by an employee only to a particular position; and personalreplacement cost or the cost incurred to replace all the services expected to be rendered bytheemployee at the various positions that he might have occupied during his work life inthe organisation. Though replacement cost method can be adapted for determining the costof replacement of groups, this method is used essentially to determine the replacementcost of individuals.(c) Opportunity Cost Method :This method is used to value employees possessing certainskills and,thus,are rate in availability.Under this method the employees are measured onthe basis of their ulternative uses.If we compare to employees have more ulternativeutilizations that will be considered as higger performer.(d) Economic Value Method:Under this method,human asset is valued on the basis of thecontribution they are likely to make to the organisation till their retirement from thejobs.The payments made to them in the form of pay,allowances,benifits,etc.,are estimatedand then discounted appropriately to arrive at the present economic value of theindividuals.This model can be expressed in the following formula. Vr= r-r(i+r)Where, the human capital value of an individual r years old. the individual’s annual earning upto retirement by the earning profile. discount rate i.e.,cost of capital retirement age.
  3. 3. The drawback of this method is that the under or over-fixation of salary may affect equatingthe total earning to the human capital.(e) Standard Cost Method:In this method standard costs of recruiting,hiring,training anddeveloping per grade employee are developed and established and made upto date everyyear.The standardcost so arrived at,for all persons are treated as the value of humanresources for accounting purposes.This is an easy method for implementation and thevariances produced should be analysed and would form a useful basis for control.(f )Current Purchase Power Method:Under this method the historical cost of investment inhuman resources is converted into current purchasing power of money with the help ofindex numbersThe standard cost method an the current purchase power method also sufferfrom all the drawbacks of the replacement cost method except that they are simplest incalculation.Eg. Employee(E1):20000 in 1980 E2 :35000 in 2000(g) Asset Multiplier Method:This method is based on the assumption that there is no directrelationship between cost incurred on an employee and his value for the organisation.This isbecause the value of an employee depends on factors like motivation,working conditionsand their attitude toward work and organisation. Human Resources AccountingHuman Human ResourcesResource Value AccountingCostAccounting Assestment and recording thePersonal Human Value ContributionCost Asset of the membersAccounting Accounting Human Resources to the productionAcquisition Development and processesCost Cost Sacrifice Incurred
  4. 4. To acquire or Replace people(2) Non-Monetary Methods:- The non-monetary methods for assessing theeconomic value of human resources also measure the Human Resource but not in dollar ormoney terms. Rather they rely on various indices or ratings and rankings. These methodsmay be used as surrogates of monetary methods and also have a predictive value. The non-monetary methods may refer to a simple inventory of skills and capabilities of people withinan organization or to the application of some behavioural measurement technique to assessthe benefits gained from the Human resource of an organization.(a) The skills or capability inventory is a simple listing of the education, knowledge,experience and skills of the firms human resources.(b) Performance evaluation measures used in HRA include ratings, and rankings.Ratings reflect a persons performance in relation to a set of scales. They are scoresassigned to characteristics possessed by the individual. These characteristics include skills,judgment, knowledge, interpersonal skills, intelligence etc. Ranking is an ordinal form ofrating in which the superiors rank their subordinates on one or more dimensions,mentioned above.(c) Assessment of potential determines a persons capacity for promotion anddevelopment. It usually employs a trait approach in which the traits essential for a positionare identified. The extent to which the person possesses these traits is then assessed.(d) Attitude measurements are used to assess employees attitudes towards their job,pay, working conditions, etc., in order to determine their job satisfaction and dissatisfaction.(e) Expected Realisable Value Method ,the elements of expected realisable value ofemployee are measured through behavioural measures. For e.g. The productivity of anemployee can be measured by using objective indices an managerial assessment.Psychometric tests and subjective evaluation can be use to measure the promo ability andtransferability of employees.
  5. 5. Q.What is Human Resource Information System, What is its role in CareerPlanning?*Human Resource Information System(HRIS): - HRIS is a systematic way ofstoring data and information for each individual employee to add planning, decision makingand submitting oh returns and reports to the external agencies. In today’s era of informationtechnologies, information is power. It is the life-blood of an organisation. There has been anincreasing realisation that success of an organisation in a complex and changing businessenvironment hinges, to a large extent on the effective management of its human resources.The effectiveness of human resource management largely depends upon the quality ofinformation held by it. A Human Resource Management S��� stem (HRMS) or Human ResourceInformation System (HRIS), refers to the systems and processes at the intersection betweenhuman resource management (HRM) and information technology. It merges HRM as adiscipline and in particular its basic HR activities and processeswith the information technology field, whereas the programming of data processing systemsevolved into standardized routines and packages of enterprise resource planning (ERP)software. On the whole, these ERP systems have their origin on software that integratesinformation from different applications into one universal database. The linkage of itsfinancial and human resource modules through one database is the most importantdistinction to the individually and proprietary developed predecessors, which makes thissoftware application both rigid and flexible.Areas are:- (1) Personal Profile (Name, Age, Gender, department) (2) Career Profile (Qualification, Experience) (3) Skills Profiles (Analytical, Technical, Managerial) (4) Department Profile (Organisation level)HRIS PROCESS:- Feedback Transformation Input Output ProcessQuestionnaire to be Feedback Get the final dataused for evaluate the skills
  6. 6. *Its role In Career Planning:-The main role of maintaining HRIS system is togather, classify, process, record and disseminates the information required for efficient andeffective management of career planning in the organisation. The various role of in anorganisation can be listed as follow:(1) Career Planning: By providing necessary information such as which employees havebeen earmarked for which positions, HRIS facilitates positional advancement of employees.In other words,HRIS helps in planning for succession.(2) Recruitment: Recruitment forms the most essentials function of HRN.HRIS helps inthe recruitment process in a big way by recording the details of activities involved inemployee recruitment. These may include cost and method of recruitment and time takento fill the positions of level wise.(3) Man power planning: HRIS is used for man power planning also. it keepsinformation of organisational requirements in terms of positions HRIS connects employeesto the require positions in the organisations. It is also used to identifies vacancies andestablish employees thereon.(4) Medical History: The HRIS is also used to maintain occupational health data requiredfor industrial safety purposes, accident monitoring and so on.(5) Skill Inventory: Recording employee skills and monitoring a skill data base is yetanother use of the HRIS.Such a skill record helps identify employees with the necessary skillfor certain positions a jobs in an organisations.