Human resource accounting is a new concept in the accounting sector and its demand is increasingly rising day by day.
Firstly, we should know what is Human Resource Accounting (HRA)? Human Resource Accounting involves accounting for expenditure related to human resources as assets as opposed to traditional accounting which treats these costs as expenditures that reduce profit. It is a method of finding out the value of the employees in the organisation. The demand for human resource accounting is spread all over the world. Countries like China and Japan are a forerunner in technology advancement and it’s all possible because of work force performance.
Therefore, we can say that one of the most important factors that work for the success of every business is a good human resource. The world has realized that human resource is the real investment into business ventures that can catch and stick to the waves of success.
HRA also finds out the present economic value of its employees and managers. After measuring the cost and value of its employees and managers, the organisation prepares a report. This report is called HRA Report. It is shown to the top level management. It can also be shown to the employees, managers and outside investors. Human resources are considered as important assets for the organisation. The main advantages of Human resource accounting are as follows:-
- HRA helps the managers in manpower planning and making the right decisions about human resources.
- HRA helps the organisation to make the best utilization of human resources.
- HRA helps the organisation to place the right person at the right position depending upon his skills and abilities.
- Only reputed organisations conduct HRA. Therefore, it attracts the best employees and managers towards the organisation.
HRA helps the organisation to design a suitable training and development program for its employees and managers. So that they can be more specialised and competent in their work.
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