Human Resource Accounting (HRA) is the process of identifying, and reporting investments made in the human resources of an organization that are presently unaccounted for in the conventional accounting practice. It is an extension of standard accounting principles. Measuring the value of the human resources can assist organizations in accurately documenting their assets. In other words, human resource accounting is a process of measuring the cost incurred by the organization to recruit, select, train, and develop human assets.
Meaning of Human Resource Accounting
Human Resource Accounting is an accounting branch concerned with recognizing and measuring information about human resources working in an organization. It is a process of measuring the cost and value of human resources (employer and employee) and delivering this information to concerned parties. Human resource accounting measures expenses associated with human assets in recruiting, selecting, hiring, training and developing them. This accounting term determines the present economic value of all its employees and managers.
Human resources are key elements of every organization and have an important role in the achievement of desired goals. Human resource accounting helps in the management of all human resources by communicating information in the form of reports to top management for better decision making. It aims at the formulation and implementation of management principles for controlling human resource activities.
Importance of Human Resource Accounting
- Information of manpower planning – It provides useful information about the cost and value of the human resource. Which helps in manpower planning.
- Information for making personnel policies – Human resource accounting provides useful information that helps to create and implement personnel policies. personnel are the people who are working in the organization.
- Utilization of human resources – The efficient and effective utilization of human resources is necessary for the success of the business. Human resource accounting gives the data for proper Utilisation of human resources.
- Proper placement – Human resource accounting provides data that helps to select the right person for the right job. Previous experience of the personnel and their behavior are responsible for there placement
Increase Morale and motivation- It helps the management for the beneficiary policies of workers and employees.
- Attract best human resource – Human resource accounting helps to attract for the recruitment of the best quality of skilled personnel for the organization.