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Human Resource Accounting

Human Resource Accounting

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Published by: Sasirekha on Nov 24, 2008
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 MBA –H4020 Human Resource Accounting
1
HUMAN RESOURCE ACCOUNTING
UNIT – I
The Non accounting of human resources and the change occurring therein, of anorganization may provide a poor picture of the profits and profitability of theorganization.Likert
Objectives of the Study:
This unit aims to provide a basis for the conceptual framework of HumanResource Accounting. An attempt is made to highlight the following aspects.
 
Development of the Concept of HRA
 
An Historical Score Card
 
Meaning and Definition of HRA
 
Importance
 
Objectives of Human Resource Accounting
 
Limitations of Human Resource Accounting
 
HRA for managers & HR Professionals
 
Investment in Human Resources
 
Quality of Work Force and Organizations’ Performance
 
Efficient use of Human Resource
 
Enumerating the Assets
 
Calculating the Market Value of Assets
 
Human Capital.
 
 MBA –H4020 Human Resource Accounting
2
INTRODUCTION
To ensure growth and development of any orgnisation, the efficiency of people must be augmented in the right perspective. Without human resources,the other resources cannot be operationally effective. The original health of theorganization is indicated by the human behaviour variables, like group loyalty,skill, motivation and capacity for effective interaction, communication anddecision making.Men, materials, machines, money and methods are the resources requiredfor an organization. These resources are broadly classified into two categories,viz., animate and inanimate (human and physical) resources. Men, otherwiseknown as the human resources, are considered to be animate resources. Others,namely, materials, machines, money and methods are considered to beinanimate or physical resources.The success or otherwise of an organization depends on how best thescarce physical resources are utilized by the human resource. What is importanthere is that the physical resources are being activated by the human resources asthe physical resources cannot act on their own. Therefore, the efficient andeffective utilization of inanimate resources depends largely on the quality,caliber, skills, perception and character of the people, that is, the humanresources working in it. The term Human resource at macro level indicates thesum of all the components such as skills, creative abilities, innovative thinking,intuition, imagination, knowledge and experience possessed by all the people.An organization possessed with abundant physical resources may sometimesmiserably fail unless it has right people, human resources, to manage its affairs.Thus, the importance of human resources cannot be ignored. Unfortunately, till
 
 MBA –H4020 Human Resource Accounting
3now generally accepted system of accounting this important asset, viz., thehuman resources has not been evolved.For a long period, the importance of human resource was not taken careof seriously by the top management of organizations. Therefore, at this juncture,it becomes imperative to pay due attention on the proper development of such animportant resource of an organization. Let us now concentrate our discussion onthe conceptual framework of the Human Resource Accounting.
Development of the concept of Human Resource Accounting:
“Human Resource Accounting” is the offshoot of various research studiesconducted in the areas of accounting and finance. Human resource is an assetwhose value gets appreciated over the period of time provided placed, appliedand developed in the right direction. Till the recent past, organizations took fewefforts to assign monetary value to human resource in its accounting practice.Behavioural scientists initiated efforts to develop appropriate methodology forfinding out the value of human resource to the organization. They were againstthe conventional accounting practice for its failure to value the human resourceof an organization along with physical resources.The traditional concept suggested that expenditure on human resource istreated as a
charge against revenue
as it does not create any physical asset. Atpresent there is a change in this concept and the expenses incurred on any asset(as human resources) should be treated as capital expenditure as it yieldsbenefits which can be derived for a long period of time and could be measuredin monetary terms.

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