Professional Documents
Culture Documents
1
CONTENTS
Introduction Of Human Resources Accounting
Various Definitions of Human Resources Accounting
Methods of Human Resources Accounting
Summary
Conclusion
Bibliography
2
Introduction
Two types of resources are used in every business
enterprise:
1. Physical and financial resources
2. Human resources.
“One asset is omitted and its worth I want to know,
That asset is the value of men who run the show”
• Performance management
• Best management & human resource
• Improvement
• Correct valuation
• Useful information
• Return from business
• Motivational
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Advantages of HRA
• Decision making
• Planning for manpower
• Management of manpower
• Performance evaluation
• Motivating
• Cost benefit analysis
• Return of investment
• Management information system
• Useful to stakeholders 8
Dis advantages of HRA
3. Welfare Cost
4. Other Cost
1. ACQUSITION COST
It refers to the cost incurred in acquiring the right man for the right job
at the right time in a right quantity.
a) Recruitment Cost:-
ex: cost of recruiting material, administrative expenses, advertising
costs, agency fees, recruiters salary and travel and outside cost.
b) Selection Cost:-
ex: cost of application banks, administrative cost of processing
applications, conducting tests and interviews, medical examinations
and salaries.
c) Placement Cost:
ex: depends upon the placement, individuals ability and attitude.
2. TRAINING & DEVELOPMENT
COST
It refers to the sacrifice that must be made to train a person either
to provide expected level of performance or to enrich individuals
skills.
d) Development Programmers:
Employees may be allowed to participate in development
programs may range from ordinary lectures to international
conferences and seminars. Involves cost such as delegated fees,
travel cost, loss output etc.
3. WELFARE COST
A vital function of an employer to provide an atmosphere to the
employees to perform their work in healthy, congenial climate
conducive to good health and high morale.
I. Health Of Workers:
• Cleanliness, disposal of waste and effluents
• Ventilation and temperature
• Dust and fumes
• Over crowding
• Lighting
• Drinking water
• Latrines and urinals
4. OTHER COSTS
II. Safety Of The Workers:
• Fencing of machinary
• Hoist and lifts
• Pressure plant
• Precaution against danger fumes.
Current Assets
18,00,000 18,00,000
Methods of HRA:-
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Any amount spent on training and
developing human resources increase its efficiency,
hence capitalized. The amortization of human resource
asset is also done in the same way as that of other
physical asset. The asset is written off over its useful
life. If the asset is liquidated prematurely then it is
underwritten – off amount is charged to revenue
account. On the other hand, if it has a longer life then
expected, its amortization is reschedule.
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Advantages
Limitation
23
2) Replacement cost method:-
Advantages
This method has the advantage of adjusting the
human value of price trends in the economy and
thereby provides more realistic value in inflationary
times.
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Limitation
26
3) Opportunity cost method:-
In order to overcome
the limitations of replacement
cost method, Hekimian and Jones
suggested the use of opportunity
cost method which determines
the value of human resource on
the basis of an employee’s value
in alternative uses. Accordingly
the value of an employee is based
on his opportunity cost-the rice
other divisions are willing to pay
for the services of an employee
working in another division of an
organization.
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Thus, the value of an employee would
be high if he has several alternative uses for
employment in the various division of an enterprise.
This brings to light an important fact that the
opportunity cost is linked with scarcity. This method
determines the value of human resources by
establishing competitive bidding within an organization.
Advantages
This method ensures optional allocation of human
resources.
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4) Capitalization of salary method:-
The advocates of this
method Baruch Lev and Aba
Schwartz have used the concept of
human resources in terms of
economic value in this model.
According to them the salaries
payable to employees during their
stay with the organization may be
used as a replacement for the value
of human resources, in view of the
close co-relation between
employees’ compensation and their
value to the organization. Thus the
value of human resources is the
present value of future earnings of
homogeneous group of employees. 30
The application of this method involves the following
steps:
31
The authors of the model recommend the following
formula to :-
T
vr = ∑ l(t)
___________________________________
t=r (1+r)t-r
Where,
V = The human capital value of a person r years old,
T = The person’s retirement age,
l (t) = The person’s annual earnings upto retirement,
r = A discount rate specific to the person.
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Advantages
33
Limitation
34
5) Economic valuation method:-
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Advantages
37
Limitation
38
6) Return on efforts employed method:-
40
Limitation
41
7)Adjusted discounted future wages
method:-
47
Determining the total value of the services derived by
the organization from its all employees;
Advantages
49
9) Standard Cost Method :-