Human Resource Acconting


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Human Resource Acconting

  1. 1. HUMAN RESOURCE ACCOUNTING<br />Presented by<br />PrashantGoski<br />
  2. 2. INTRODUCTION<br />Human resource<br />Physical resource<br />
  3. 3. Development of the human resource accounting:<br /><ul><li>Traditional concept
  4. 4. Recent concept</li></li></ul><li>Meaning & Definition:<br /><ul><li>1. The American Accounting Society Committee on Human Resource Accounting defines it as follows:
  5. 5. “Human Resource Accounting is the process of identifying and measuring data about human resources and communicating this information to interested parties.”</li></li></ul><li><ul><li>Another management consultant Stephen Knauf has defined HRA as:
  6. 6. "The measurement of quantification of human organization inputs such as recruitment, training, experience and commitment"</li></li></ul><li>Objective<br />To furnish cost value information<br />To monitor effectively <br />To have analysis human asset<br />To aid in the development of proper decision making <br />Facilitated valuation of human resources<br />
  7. 7. Historical Score Card of HRA<br /><ul><li>The concept of considering the human beings as an asset is an old one
  8. 8. Sir William Petty was the pioneer in this direction. The first attempt to</li></ul> value the human beings in monetary terms made by him in 1691<br /><ul><li>Petty considered labour was “the father of wealth’
  9. 9. Further efforts were made by William far in 1853, Earnest Engle in 1883</li></ul>.<br /><ul><li> Accountants and economists realized the fact that an appropriate</li></ul> methodology <br />
  10. 10. <ul><li>Human Resource Accounting was first started with simple measures of</li></ul>trying to convert output data into contributions<br /><ul><li>HR programme effected a change especially for organizations operating on profit</li></ul>basis, its value was determined by calculating the profit contribution.<br /><ul><li>Historically the first major systematic effort at evaluation was made by</li></ul>RG Barry Corporation of Columbus in 1967. <br />Historical Score Card of HRA<br />
  11. 11. Importance of HRA<br /><ul><li>HRA helps the management in the Employment, locating and utilization of human resources.
  12. 12. Helps in deciding the transfers, promotion, training & retrenchment of HR
  13. 13. It assists in evaluating the expenditure incurred for imparting further</li></ul>education and training in employees in terms of the benefits derived by firm.<br /><ul><li>It helps to identify the causes of high labour turnover at various levels</li></ul>and taking preventive measures to contain it.<br />
  14. 14. <ul><li>It provides valuable information for persons interested in making long</li></ul>term investment in the firm.<br /><ul><li>It helps in locating the real cause for low return on investment, like</li></ul>improper or under-utilization of physical assets or human resource or both.<br /><ul><li> It helps employees in improving their performance and bargaining</li></ul>power. It makes each of them to understand his contribution towards the<br />betterment of the firm the expenditure incurred by the firm on him.<br />Importance of HRA<br />
  15. 15. Investment in human resource<br />
  16. 16. Investment in Human Resources:<br /><ul><li>considered as an asset:
  17. 17. Asset is anything which is owned by the entity to derive service in future and should have legally enforceable claim
  18. 18. Does not:-
  19. 19. As such there is no guarantee of deriving benefits from the existing human resources in future and has no sales value like other assets
  20. 20. Does :-
  21. 21. There is a legal ownership on the human resource</li></li></ul><li>Types of human assets<br /><ul><li>Intellectual capital.
  22. 22. Social capital
  23. 23. Emotional capital
  24. 24. Spiritual capital</li></li></ul><li>Cost of Hunan Resources<br /><ul><li>1. Acquisition Cost
  25. 25. 2. Training (Development) Cost
  26. 26. 3. Welfare Cost
  27. 27. 4. Other Costs</li></li></ul><li>Acquisition cost comprised the following costs:<br /><ul><li>(i) Recruitment Cost
  28. 28. (ii) Selection Cost
  29. 29. (iii) Placement Cost
  30. 30. (iv) Campus Interview Cost</li></li></ul><li>Training (Development) cost includes the following:<br /><ul><li>(i) Formal Training Cost
  31. 31. (ii) On the Job Training Cost
  32. 32. (iii) Special Training
  33. 33. (iv) Development Programmes</li></li></ul><li>Welfare Cost includes the following:<br /><ul><li>(i) Medical Expenditure
  34. 34. (ii) Canteen Expenditure
  35. 35. (iii) Specific and General Allowances
  36. 36. (iv) Children Welfare Expenses
  37. 37. (v) Other Welfare Expenditure</li></li></ul><li>Other Costs include the following:<br /><ul><li>(i) Safety Expenditure
  38. 38. (ii) Ex-gratia
  39. 39. (iii) Multi-trade incentives
  40. 40. (iv) Rewarding Suggestions</li></li></ul><li>Enumerating the Assets<br />
  41. 41. Example: A firm has started its business with a capital of Rs.10,00,000. It has<br />purchased fixed assets worth Rs.5,00,000 in cash. It has kept Rs.2,60,000 as<br />working capital and incurred Rs.2,40,000 on recruiting, training and developing<br />the engineers and few workers. The value of engineers and workers is assessed<br />at Rs.8,00,000.<br />
  42. 42. Evaluation of Human Resource<br />BALANCE SHEET<br />(INCLUDING HUMAN RESOURCES)<br />
  43. 43. Methods of valuation of human assets<br />a) Cost based approaches:<br />b) Monetary value based approaches<br />c) Non- monetary value -based approaches:<br />
  44. 44. Cost based approaches<br /><ul><li>Historical Cost
  45. 45. Replacement Cost
  46. 46. Opportunity Cost
  47. 47. Standard Cost</li></li></ul><li>Limitations<br />No proper and specific procedure.<br />Valuing human resource is uncertain.<br />Fear that HRA may dehumanize & manipulate employees.<br />No proof of HRA as a tool of mgmt.<br />Problem for mgmt. to treat HR as assets.<br />Tax law do not consider human being as assets.<br />No universally accepted method of human asset valuation.<br />
  48. 48. Conclusion <br />
  49. 49. Thank You…<br />