1. Meaning of human resource
accounting
 Human Resources accounting, also known as
Human Asset Accounting, involved identifying,
measuring, capturing, tracking and analyzing the
potential of the human resources of a company and
communicating the resultant information to the
stakeholders of the company.
 It was a method by which a cost was assigned to every
employee when recruited, and the value that the
employee would generate in the future.
Human Resource accounting reflected the potential of
the human resources of an organization in monetary
terms, in its financial statements.

2.  AAA Definition:
“ The process of identifying and measuring data about
human resources and communicating this information to
the interested parties ”
Stephen Knauf (1983):
“ The measurement and quantification of human
organizational inputs such as
recruiting, training, experience and commitment ”
Eric Flamholtz
“ Accounting for people as organizational resources. It is
the measurement of the cost and value of people for the
organization ”

3. Why HRA?
It furnishes cost/value information for making
management decisions about acquiring, allocating,
developing, and maintaining human resources in
order to attain cost-effectiveness;
It allows management personnel to monitor effectively
the use of human resources;
It provides a sound and effective basis of human asset
control, that is, whether the asset is appreciated,
depleted or conserved;
It helps in the development of management principles
by classifying the financial consequences of various
practices.

4. Need for hra
 HR Accounting is very much needed to provide
effective & efficient management within the
organization.
 If there is any change in the structure of manpower, it
is HRA which provides information on it to the
management.
 HRA provides qualitative information & also assess the
cost incurred in personnel.

5.  It gives a platform to the management by providing
factors for better decision-making for future
investment.
 The return on Investment on human capital is best
evaluated through HRA.
 HRA communicates to the organization & public about
the worth of human resources & also its proper
allocation within the organization.
 HR helps the management in developing principles by
classifying the financial consequences of the various
practices.

6. Valuation Approaches of Human
Resource
Measurement is arbitrary and there are mainly 2
approaches;
Cost based approaches
 Present Value of Future Earning
 Cost Based Approaches
1. Historical Cost Approach
2. Replacement Cost Approach
3. Opportunity Cost Approach

7. Historical Cost Approach
The cost of recruitment, selection, development are all
capitalized and amortized over the useful life time of
the employee. This amortization may be dealt
according to the situation.
Benefits: Easy to operate, Conforms with the matching
principle, Similar to the treatment of other fixed assets
Shortcomings: Estimation of the useful life time may
not be easy, The value of humans are generally
increasing over time - but this method gives a
declining picture, This method doesn’t actually
measure the value but undermines it

8. Replacement Cost Approach
The cost to replace the existing human resources are
estimated. All costs incurred to attain the current level
of competence of an existing employee. Created from
scratch
Benefits: Is present/ future oriented
Disadvantage: Not always possible to obtain such a
measure (identical replacement), It is hence
subjective

9. Opportunity Cost Approach
Is based on economic concept which overcomes the
deficiency in replacement cost app. Measured through
a competitive bidding process within the entity.
Steps:
1. The entity is divided in to investment centers
2. The investment centre managers bid for scarce
employees they need within the entity
3. The maximum bid price may obtained by the
capitalization of the excess profits generated by the
employee

10. Present Value of Future
Earnings
 Lev and Schwartz (1971) proposed an economic valuation
of employees based on the present value of future earnings,
adjusted for the probability of employees’ death/se
parathion/retirement.
 This method helps in determining what an employee’s
future contribution is worth today.
 According to this model, the value of human capital
embodied in a person who is ‘y’ years old, is the present value
of his/her future earnings from employment and can be
calculated by using the following formula:
E(Vy) = Σ Py(t+1) Σ I(T)/(I+R)t-y
T=Y Y
where E (Vy) = expected value of a ‘y’ year old person’s human
capital T = the person’s retirement age Py (t) = probability of
the person leaving the organization I(t) = expected earnings of
the person in period I r = discount rate

11. Limitations
The measure is an objective one because it uses
widely based statistics such as census income return
and mortality tables.
The measure assigns more weight to averages than to
the value of any specific group or individual.

12. Investment pattern
The human resource investment usually consists of the
following items:-
1) Expenditure on advertisement for recruitment
2) Cost of selection
3) Training cost
4) On the job training cost
5) Subsistence allowance
6) Contribution to provident Fund
7) Educational tour expenses
8) Medical expenses
9) Ex-gratia payments
10) Employee’s Welfare Fund
All these items influence directly or indirectly the human
resources and the productivity of the organization.

13. Hra in india
Though Human Resources Accounting was introduced way
back in the 1980s, it started gaining popularity in India after it
was adopted and popularized by NLC. Even though the
situation prevails, yet, a growing trend towards the
measurement and reporting of human resources particularly
in public sector is noticeable during the past few
years. BHEL, Cement Corporation of India, ONGC,
Engineers India Ltd., National Thermal Corporation,
Minerals and Metals Trading Corporation, Madras Refineries,
Oil India Ltd., Associated Cement Companies, SPIC,
Metallurgical and Engineering consultants India Limited,
Cochin Refineries Ltd. Etc. are some of the organizations,
which have started disclosing some valuable information
regarding human resources in their financial statements. It is
needless to mention here that, the importance of human
resources in business organization as productive resources
was by and large ignored by the accountants until two
decades ago.

14. Social Accounting
social accounting may be defined as identification and
recording of business activities and social
responsibilities.
social responsibilities concept is one of the important
concept of management.
it is the duty of enterprise to do some social activities
to completing their social responsibilities.
social accounting is very important tool to measures
the performance of any company in a view of social
responsibilities.

15. company has to make the social responsibilities
income statement and balance sheet. But it is not
compulsory to make these statement.
France , UK and USA are the top countries where
social responsibility statements are made with other
financial statements . In India social accounting is not
so popular but some India companies are now focusing
on social responsibility and also started to make social
report for calculating to total cost and benefits for
performing social responsibility .

16. objectives of social accounting
Main objectives of social accounting are to help society by
providing different facilities by enterprise and to record
them. We can write them in following points.
1. Effective utilization of natural resources
Main objectives of making social accounting is to
determine whether company is properly utilize their
natural resources or not .

17. 2. Help to employees
Company can help employees by providing the facility
of education to children of employees, providing
transport free of cost and also providing good working
environment conditions .
3.Help to society
Because companies' factories spread the pollution in
natural society which is very harmful for society . So ,
enterprise can help to society by planting the trees ,
establishing new parks near factory area. and also
opening new hospitals .

18. 4. Help to customers
In social accounting this the part of benefits given by
company to society , if company provides goods to
customers at lower rate and with high quality .
5. Help to investors
Company can help to investors by providing
transparent accounting information to investors .
Because of many objectives are related to safeguarding
of natural resources so this accounting is also known
as Social and Environmental Accounting, Corporate
Social Reporting, Corporate Social Responsibility
Reporting, Non-Financial Reporting, Sustainability
Accounting

20. Aditya Birla social projects
 vision
"To actively contribute to the social and economic
development of the communities in which we
operate. In so doing, build a better, sustainable
way of life for the weaker sections of society and
raise the country's human development index."

21. Education
Balwadis
(pre-school)
Adult
education
Non-formal
education
 Continuing
education
 Scholarships
for girls, merit
and technical
education

22. Farmers
development
Self-help groups
 SGSY - dairy,
readymade
garments, jute
project, basket
making, aggarbati
making, bee keeping,
durrie making.
 Check dam
 Irrigation
 Land development
 Soil and water
conservation
 Pasture
development
 Social forestry/
plantation activities/
nursery
Horticulture
Farmer training

23. Health and
family welfare
Mobile clinics -
doctors visit once a
week
Medical camps -
general and issue-
based
Health training
and awareness
Sanitation - toilets,
training, smokeless
chullahs, biogas
Safe drinking water
Mother and child
health
Reproductive
health
Awareness building

24. Infrastructure
development
Roads
Dams
 Community
centers
Houses Culverts
 Electricity
 Health centers
Water channels
 Schools

25. Social causes
Widow / dowry-
less mass marriages
Women
empowerment
Awareness drives
on
knowledge, attitude
and practices

26. Social responsibility income
statement
No. particular Amount(credit)
1.
Opening of park expenses
- - - - - - - -
2.
health free services
- - - - - - - -
3.
plantation
- - - - - - - -
4.
water free facility
- - - - - - -
5.
employees
- - - - - - - -
Net (credit)balance - - - - - - - - -

27. No. particular Amount(debit)
1. Natural losses due to pollution - - - - - - -
2. Health defects - - - - - - -
3. other losses due to co. operations -- - - - - -
Net(debit )balance - - - - -- -
Net benefits given by co. to society
(credit-debit)
- - - - - - -

28. Thank you